Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — TRADE

Oil Slicks

Mr. Canavan: asked the Secretary of State for Trade whether he is satisfied with the contingency plans of his Department for dealing with oil slicks.

The Under-Secretary of State for Trade (Mr. Clinton Davis): Contingency plans to protect the coasts from pollution have been tested by exercises and live incidents and shown to be generally satisfactory. Nevertheless my Department constantly endeavours to improve its capability in order to meet changing circumstances, such as the additional pollution hazards of offshore oil exploitation.

Mr. Canavan:: In the case of the recent Ekofisk blow-out, the blow-out preventer was wrongly fitted upside down. Does that not indicate a need for close: inspection? Since such incidents as the Ekofisk blow-out and the tanker which is today reported to be grounded off the coast of Germany could have disastrous consequences, what additional steps are the Government taking to ensure that the oil companies face up to their responsibilities to provide vessels to fight fires, to deal with pollution and to prevent damage to fishing grounds and coastlines?

Mr. Davis: The first part of my hon. Friend's question is a matter not for me but for the Secretary of State for Energy. As for the responsibilities of oil companies, the specific point that my hon. Friend has mentioned is being closely investigated with the oil companies. There is a Standing Committee on Pollution

Clearance at Sea, and a whole variety of other methods have been established to ensure that there is the closest coordination between all organisations and parties which have some responsibility in this area.

Mr. Grimond: Is the hon. Gentleman aware that I am grateful to him and to a galaxy of Ministers who have been explaining to me the precautions against pollution? The public will be grateful to the Government for the plans they have drawn up. Is he also aware, however, that there is still some anxiety about the chain of command and whether each local authority has sufficient resources to discharge its wide responsibilities?

Mr. Davis: This morning the right hon. Gentleman came to see the Secretary of State for Energy and, as he put it. a whole galaxy of Ministers. We had a long and fruitful discussion about a whole variety of matters that concern us all.
On the point about the chain of command, we do not wish to be complacent but we have no reason at present to consider that it has led to any difficulties. However, we are keeping the matter under review, as the right hon. Gentleman knows. The point about local authorities is a matter for the Secretary of State for the Environment, but I do not believe that there is cause for anxiety on this score, although the level of resources must be increased, and this matter is receiving careful attention.

Mr. Henderson: Is the hon. Gentleman's Department responsible for evaluating the effect of pollution on fishing grounds? If not, who is carrying out such an inquiry and when are we likely to hear the results?

Mr. Davis: That is a matter for the Ministry of Agriculture, Fisheries and Food, but there is co-ordination with a number of Ministries involved in the matter and a joint effort is being made.

Mr. Costain: Is the hon. Gentleman aware that compensation has not yet been paid in respect of boats in Folkestone Harbour although the oil damage there took place more than 18 months ago? Will he give an assurance that he will speed this up?

Mr. Davis: I shall look at the matter, but I do not recall the hon. Gentleman


previously having written to me about it. However, as he has now drawn the matter to my attention I shall certainly look into it.

Concorde

Mr. Biffen: asked the Secretary of State for Trade if he will make a statement on the Noise Advisory Council's report concerning Concorde engine noise during the first eight months of scheduled service between London and Bahrain and Washington.

Mr. Hugh Jenkins: asked the Secretary of State for Trade what action he is taking to implement the recommendation of his Noise Advisory Council on Concorde noise levels.

Mr. Clinton Davis: The report is being studied and I shall respond formally to the Council's recommendations as soon as possible.

Mr. Biffen: Can the hon. Gentleman confirm that the report indicates that at both 5 km. from the start of the takeoff roll and 30 km. from the start it was demonstrated that Concorde was noisier than the Boeing 707? Does he intend to have discussions with the manufacturers about this report, also taking into account the findings of the report which was recently submitted by the Civil Aviation Authority? Will he seek an assurance from the manufacturers that they will do something to make the aircraft less noisy?

Mr. Davis: My right hon. Friend the Secretary of State has tried to keep the House well informed about the situation. Two reports have been published recently, one by the Civil Aviation Authority and one by the Noise Advisory Council. The first of those reports is based on 12 months of operation of Concorde, and the hon. Gentleman has selected only one facet of that report. The overall conclusion reached by the CAA technical report was that on arrival Concorde is on a par with the Boeing 707 and that on departure it is within the range of noise levels recorded at permanent monitoring sites by subsonic aircraft using the same runways. Those are two pertinent points that should be borne in mind.

Mr. Speaker: It is clear that the first two Questions on the Order Paper are of wider interest. I hope that hon.

Members whom I call will direct short questions and that we shall have short answers.

Mr. Jenkins: Is my hon. Friend aware that our right hon. Friend the Secretary of State for the Environment is Chairman of the Noise Advisory Council and in that capacity is party to the report which says that Concorde is significantly noisier than any subsonic aircraft? In responding to that report, will my hon. Friend recognise that he is responding to our right hon. Friend who is a party to the view which I hold—namely, that Concorde is a very noisy aircraft indeed and should not be excluded from the limitations placed upon subsonic aircraft which have resulted in my hon. Friend giving answers to the House that have been misunderstood?

Mr. Davis: I am not answering my right hon. Friend; I am answering my hon. Friend who has a peculiar view about Concorde. My right hon. Friend was not responsible for the report or the views contained in it and has expressly said so. I regret to say that once again my hon. Friend is being carefully selective.

Mr. Adley: Does the hon. Gentleman agree that in eight of the 12 months the Boeing 707 was found to be the noisiest airplane at the statutory monitoring point at Heathrow and that the average weekly traffic movements over the past 12 months show seven Concordes and 463 Boeing 707s? Can he tell us when the Noise Advisory Council and other people will turn their attention to the real target if we are serious about cutting down aircraft noise?

Mr. Davis: The answer to the hon. Gentleman's first two questions is "Yes". On the third, I do not know.

Mr. Ronald Bell: What progress is the hon. Gentleman making in dealing with the problem of secondary or reflected noise from Concordes over the English Channel which has affected a number of constituencies all the way from the South-West to my own?

Mr. Davis: I have tried to keep hon. Members who are particularly interested in this matter closely informed about the steps that the Government have taken and I have written to them a number of


times. We are carrying out intensive investigations and are discussing with the French possible changes to the flight paths.

Mr. Cope: Will the hon. Gentleman confirm that the Noise Advisory Council's report was based on a CAA report which was published earlier than the one he has mentioned and that it covered only about 1½ per cent. of the Boeing 707 flights out of Heathrow, although they have proved to be generally the noisiest planes?

Mr. Davis: Yes.

Mr. Marten: Does one not have to be careful in talking about the Boeing 707, because the 320-C series of that aircraft is noisier than Concorde?

Mr. Davis: Yes.

Mr. Parkinson: Has the Minister read reports that British opponents of Concorde have addressed public meetings in New York and alarmed people by claiming that there has been a huge fall in property values around London Airport because of the operations of Concorde? Will he take this opportunity to deny that outrageous allegation?

Mr. Davis: I am tempted to say only "Yes", but I should add that it is reprehensible that there has been an orchestrated campaign to damage this aircraft and the employment of many thousands of people who are dependent upon its successful operation. The situation is being considered by the district court in Manhattan and we ought to await the conclusions of the learned judge in the case.

Mr. Speaker: I am grateful for the response to my earlier request.

British Airways (Disputes)

Mr. William Shelton: asked the Secretary of State for Trade if he will list the disputes that have occurred at British Airways, or at BEA and BOAC before the formation of British Airways, over the last five years that have resulted in a loss of more than £1 million to the airline

Mr. Clinton Davis: Six disputes fall into this category. Industrial action was taken by cabin crew and engineering supervisors in 1974 and by TriStar maintenanace staff in 1975, when there were also problems with the integration of the

cargo centre. This year there was industrial action by aircraft and catering loaders, and most recently of course by engineering maintenance staff.

Mr. Shelton: Is the hon. Gentleman aware that these disputes usually take place during peak holiday times? Will he condemn the infliction of hardship on travellers as a means of industrial bargaining?

Mr. Davis: That is not a particularly constructive or helpful approach. It is not likely that industrial disputes would take place in the middle of the night when there are scarcely any aircraft movements. Of course the travelling public are inconvenienced, and one regrets that. British Airways management and the unions concerned are anxious to produce a better industrial relations scenario at Heathrow, and I believe that they are thinking positively about that.

Mr. Molloy: Is my hon. Friend aware that, despite the many negotiations that have been going on at Heathrow between British Airways and the unions, there are still some sensitive points over which trouble could brew again because of misunderstandings? Will he consult the Secretary of State for Employment and ask him to offer his services to the unions and the management to prevent a recurrence of what happened some weeks ago?

Mr. Davis: My hon. Friend is right in saying that there are still sensitive areas at Heathrow. I can assure him that Ministers in the Departments of Trade and Employment are watching the situation carefully, as is ACAS. Although there may be difficulties—and one cannot be complacent about that—British Airways are taking a new initiative in employee participation with the unions, and this is to be encouraged.

Exports

Mr. Durant: asked the Secretary of State for Trade if he is satisfied with the volumes of exports recorded for the last two months; and if he will make a statement on the efforts made by his Department to improve on this performance.

The Under-Secretary of State for Trade (Mr. Michael Meacher): No, Sir. I am looking for a greater contribution from exports towards the elimination of the


deficit on the current account of the United Kingdom's balance of payments.

Mr. Durant: Is the hon. Gentleman aware that the current trend in exports is rather worrying and that there has been a slight fall? Is he also aware that the trouble lies in the incentives to export, an example of which was the recent confusion over the taxation of people going abroad to market British exports? Could he do something to encourage exporting, because the Government are not doing it at the moment?

Mr. Meacher: I am certainly aware that the recent trend in exports has not been as satisfactory as we should have liked, although in February and March our exports were up by 7 per cent. on the same period last year. America's exports fell in the first quarter this year, so it is not only our exports that are encountering difficulties. In regard to incentives, I am sure that the hon. Gentleman appreciates the importance of the new regime for exporters introduced recently by the Chancellor of the Exchequer. Our latest estimate is that exports will increase by about 5½ per cent. in the next year.

Mr. Madden: Has my hon. Friend seen the report prepared by economists working for the NEDC, which pointed out that the difficulties with exports were arising from non-price factors, particularly design, quality and delivery dates? Does he agree with the report's conclusions which highlighted these reasons for our not maximising export effort?

Mr. Meacher: I am sure that non-price factors are important, although it is impossible to quantify them precisely. British exports have generally always had a high reputation for quality, but not always for delivery. I think that the emphasis that the Government have given to securing export-led growth for our economy by a tight monetary policy on the home market should ensure that once the export drive gets under way it will be sustained and will not be broken off short.

Japan

Mr. Hoyle: asked the Secretary of State for Trade what is his policy towards trade with Japan following his recent visit.

Mr. Sims: asked the Secretary of State for Trade what further measures he proposes to take to encourage Anglo-Japanese trade following his recent visit to Japan.

Mr. Neubert: asked the Secretary of State for Trade what proposals he has for reversing the current trend in the balance of United Kingdom trade with Japan.

Mr. Ioan Evans: asked the Secretary of State for Trade, following his recent visit to Japan, what action is proposed regarding the United Kingdom's trade relations.

The Secretary of State for Trade (Mr. Edmund Dell): During my discussions with Japanese Ministers and business leaders, I stressed that a satisfactory trading relationship could not be achieved without a substantial increase in British exports to Japan. I look forward to Japanese co-operation in improving opportunites for imports from the United Kingdom and in continuing to restrain sensitive exports. The Government will continue to give strong support to British business men wishing to sell in Japan.

Mr. Hoyle: Will my right hon. Friend continue the line he took in Japan—

Mr. Skinner: They are only words.

Mr. Hoyle: —because, unlike the Leader of the Opposition, the ordinary person in the street is fed up with the fact that Japan is seeking to destroy vital industries in this country while refusing to accept British imports on the same terms as we accord to Japanese imports?

Mr. Skinner: He is doing nothing about it. He is just talking.

Mr. Dell: When in Tokyo I made perfectly clear to the Ministers concerned that we looked to an improvement in our exports to Japan and that the Japanese Government and industry could assist in that respect.

Mr. Sims: Does the Minister think that the tone of his remarks in Tokyo helped our relationships with Japan, particularly on a trading basis? Will he confirm that many of the so-called non-tariff barriers affect domestic products as they affect imported products? Is it not true that British manufacturers who set out to be


as efficient as their Japanese counterparts enjoy a considerable measure of success when exporting to Japan?

Mr. Dell: The hon. Gentleman asked whether I thought my remarks in Tokyo helped our relations with Japan. When one discusses matters with another Government, it is best to make clear the anxieties that are felt at home. I made that perfectly clear, and I do not think it was misunderstood or that it in any way harmed our relations with Japan. Of course British manufacturers must produce the right product, but they find by experience that it is peculiarly difficult to sell in Japan even when products are competitive. This relates to reasons the removal of which could be assisted by the Japanese authorities.

Mr. Neubert: Does the right hon. Gentleman share the scepticism of his hon. Friend the Member for Bolsover (Mr. Skinner) in recognising the futility of trying to improve the balance of payments by ministerial edict? When invisible earnings are taken into account, is it not arguable that our total trade with Japan is in surplus?

Mr. Dell: I do not expect to improve the balance of payments by ministerial edict. I believe that the Japanese Government could bring a certain influence to bear in terms of the level of Japanese imports. As for the level of invisible earnings, that matter has been discussed on many occasions. It is clear that invisible earnings are an advantage to this country, but they do not come anywhere near balancing our deficit with Japan.

Mr. Evans: May I congratulate my right hon. Friend on the frank and novel way in which he spoke to the Japanese Government and industry, which undid some of the harm caused by the visits made to Japan by the right hon. Lady the Leader of the Opposition? Will he consult the Department of Industry and tell its officials to keep an eye on the industries set up by Japan in this country, since those industries are not becoming manufacturing industries but instead are assembling plant and components imported from the Far East?

Mr. Dell: The matter to which my hon. Friend refers is one for my right hon. Friend the Secretary of State for Industry. My hon. Friend will no doubt

know that the Department of Industry has brought pressure to bear on Japanese investors in this country to use locally-made components.

Mr. Nott: Since the communiqué issued after the recent summit meeting laid great stress on giving the Tokyo Round negotiations another boost, may I ask whether the Prime Minister of Japan and the President of the United States gave any indication of their wish to give the multilateral trade negotiations further help by reducing tariff barriers to our exports, since these are considerable in both countries?

Mr. Dell: I discussed this matter on a recent visit to Washington, and when in Tokyo I met the Japanese Prime Minister. Both countries felt it necessary to give an impetus to multilateral trade negotiations. This means removing non-tariff barriers which currently impede our exports to those countries. The problem in Japan, however, is not primarily a matter of formal obstacle. The trading system there does not allow freedom of imports in the same way as does the trading system in European countries.

Mr. MacFarquhar: In talking to firms in this country which wish to increase their exports, will the right hon. Gentleman encourage them to emulate British Leyland, which has taken the step of setting up its own offices in Tokyo with a view to pushing ahead with its exports?

Mr. Dell: Yes, Sir. Many British firms have devoted considerable efforts to increasing exports to Japan, and in the last five months for which we have figures in sterling terms the value of our exports shows a 42 per cent. increase over the equivalent period in the previous year. There is no doubt that currently British industry is making substantial efforts to export to Japan, but we could do even better if there were a change of attitude on the part of the Japanese.

A. M. Devereux Ltd.

Mr. John Hunt: asked the Secretary of State for Trade if he will seek an early meeting with the Official Receiver in companies liquidation with regard to the case of Messrs. A. M. Devereux Limited, in view of the continuing delay in resolving the liabilities of the company and making payment to the outstanding creditors.

Mr. Clinton Davis: A receiver for the debenture holder of A. M. Devereux Limited is in possession of the assets, and he is required to pay the preferential and debenture holder's claims. I am not in a position to intervene.
The Official Receiver, as liquidator of the company, cannot make any payments to the ordinary unsecured creditors until the receivership is completed and any surplus funds then remaining are paid over to him.

Mr. Hunt: Is it not intolerable that one of my constituents, a former employee of this company, has already had to wait more than four years for the arrears of wages and holiday pay which are due to him? Is the Minister aware that as long ago as August 1974 the Official Receiver said that this case was almost completed, and yet we now have more difficulties emerging in correspondence and we are told that the Inland Revenue has created more difficulties? How much longer will this saga continue? Will the Minister bang a few heads together and get things moving?

Mr. Davis: I have already told the hon. Gentleman that I cannot intervene. If his constituent has any problems about the conduct of the Official Receiver, he has available to him recourse to the courts under Section 80 of the Bankruptcy Act. The receiver inherited a number of difficult accounting problems and he had to wait for the new accounts to be published. He hopes that those accounts will be finalised in three months' time.

European Community

Mr. Marten: asked the Secretary of State for Trade whether he is satisfied with the United Kingdom's trade with the EEC.

Mr. Meacher: No, Sir. I am looking for a further improvement in our visible trade position with the Community, following the reduction of some £270 million in our deficit with it in 1976.

Mr. Marten: Is the Minister aware that since we joined the Community in January 1973 we have accumulated a total trading deficit of over £8,300 million and that this figure is now running at an annual rate of £2,500 million? Is he further aware that our trade with the

Common Market represents 38 per cent. of our world trade yet 57 per cent. of our total trade deficit? Since we cannot allocate invisibles to trade areas, does he not agree that this terrible deficit must in some part be the cause of the decline in the value of sterling last year?

Mr. Skinner: It has been a disaster since we got in.

Mr. Meacher: The hon. Gentleman has spelt out the size of the total trade deficit since 1973, and I agree that it is far too large. But it is also true to say that since 1973 our trade has deteriorated in respect of our other main industrialised partners, namely, the United States and Japan—marginally in one case but significantly in the other.
The hon. Gentleman should be fair in taking account of some offsets that exist, partly in terms of monetary compensation amounts, which at the lowest point of devaluation were worth £400 million a year. In terms of invisibles we have had a surplus in the EEC of £350 million in one year and of £150 million in the next. Those figures are very much lower than the deficit on invisible trade, but they are not insignificant.

Mr. Jay: Is my hon. Friend aware that our trade deficit with the EEC is now four or five times greater than our trade deficit with Japan?

Mr. Meacher: Yes, Sir.

Sir A. Meyer: In view of what has been said in other replies about our trade with Japan, will the Minister confirm that the EEC offers a vast assured home market if only this Government would make it possible for the goods to be produced?

Mr. Meacher: The question of whether it is an advantage that there is a mutual reduction of tariffs must be seen in the context of the changing pattern of trade and the size of the deficit or surplus. I do not think that the existence of that assured market has yet quite produced the results which some hoped to see from it.

Mr. Skinner: Does my hon. Friend recall that, as an anti-Marketeer, he argued on platforms against British entry into the Common Market on the basis that we should not be able to supply this 250


million population-type market with our consumer durables even though we should be buying its food? Second, does my hon. Friend know that at the county council elections in my constituency of Bolsover the other day several anti-Marketeers stood on the platform of still being against the Common Market, that every one of them was returned and that we made a Labour gain as well?

Mr. Meacher: Many conclusions have been drawn from the anti-Common Market stance taken by candidates at the recent elections. Whatever be the truth about that, however, there is no alternative in the short term but to improve our competitiveness and our productivity and to reduce the margin which separates us and the EEC, since there is no reason why, in terms of manufactures, we cannot further reduce the deficit considerably.

Mr. Nott: Is there any evidence whatever to show that, if we had not entered the Community and we still had a substantial tariff barrier against our goods into the EEC, and vice versa, our deficit would not be even greater than it now is?

Mr. Meacher: The evidence on that point is conjectural, but I shall allow it to the hon. Gentleman that interest rate differentials and differentials in domestic inflation rates are considerably more important in modern trading conditions than are relatively small changes in tariffs.

Investment (Heads of State)

Mr. Frank Allaun: asked the Secretary of State for Trade if he will introduce amending legislation to the Companies Act 1976 to ensure that the investments of the Royal Family and Heads of other States will be subject to the same disclosure as those of commoners.

Mr. Dell: No, Sir.

Mr. Allaun: As the Government have declared that they favour wider disclosure, is not this special secrecy positively feudal? Second, what is to prevent relatives of foreign potentates each taking up to 5 per cent. of shares in a British company, thus acquiring control unknown to the British public, to the company concerned and to its employees?

Mr. Dell: The object of the section in the Act was to deal with the problem of warehousing. That is what it effectively does, and the section is drafted for that purpose. Under the section, if anyone holds 5 per cent. this has to be revealed, and the exemption does not cover that. My hon. Friend asks whether it is possible for a large number of people associated in a family to acquire control of a company by each acquiring less than 5 per cent. Under this system it is one of the functions of the Bank of England to police exactly that sort of undesirable happening.

Trade Balance

Mr. Edwin Wainwright: asked the Secretary of State for Trade if he will make a statement on the latest balance of trade position.

Mr. Dell: There has been an underlying improvement in the United Kingdom's balance of payments position in recent months, which is expected to continue through 1977.

Mr. Wainwright: I thank my right hon. Friend for that reply, but is it not true that, although free trade might be a fine principle, imports come too easily into this country, with substantial effect on the textile and footwear industries and now also on special steels? Is he aware that the Japanese are now talking about taking 20 per cent. of our gardening tools market? Further, on the question of exports, will my right hon. Friend have a word with his right hon. Friend the Secretary of State for Energy about the surplus coal in this country? Why cannot we export it to the EEC in place of the imports which are coming from countries outside the EEC?

Mr. Dell: It is one of the objects of the multilateral trade negotiations, which the leaders at the summit asked should be given impetus, that trade should be free of impediments to exports and imports. In the specific areas to which my hon. Friend referred, the Government have taken action. For example, they have taken action in respect of footwear, although I know that further representations are to be made to me, and they have taken action in respect of steel and special steels. As regards textiles, my hon. Friend knows that the situation is currently the


subject of the renegotiation of the multi-fibre arrangement. I shall certainly discuss the point about coal with my right hon. Friend.

Mr. Higgins: Does the Secretary of State appraise our present trade position as Mr. Sam Brittan has suggested, from the point of view of a model of modern mercantilism? Second, in connection with the multilateral trade negotiations, does the right hon. Gentleman accept that the principles of the common agricultural policy are entirely open to be renegotiated in the course of those negotiations?

Mr. Dell: As regards the standpoint from which I appraise the multilateral trade negotiations, I suggest that the hon. Gentleman reads the 54-page lecture which I gave but which I hesitate to summarise at the moment. As for the part to be played by the common agricultural policy in the multilateral trade negotiations, it is quite understood that the multilateral trade negotiations cannot affect the general principles of the common agricultural policy.

Mr. Marten: Why not?

Mr. Dell: That has been accepted as part of the European position in these negotiations, and I think that the United States also accepts it. That does not mean that other forms of action may not be possible in regard to agriculture.

Mr. Heffer: I have not had the advantage of reading my right hon. Friend's 54-page lecture, so will he tell the House, in view of all the various statements made today which underline our point that we have effectively gained nothing out of being in the Common Market, whether in any part of that lecture he spells out what tiny advantages we have got from being in this monstrosity?

Mr. Dell: In the course of the lecture I briefly referred to our membership of the European Economic Community and I indicated some of the advantages in trade negotiations which have accrued to us therefrom. For example, in the specific area of textiles and the negotiation of the multi-fibre arrangement, I assure my hon. Friend that the views of this country would weigh a great deal less were they not associated with the views of eight other important trading nations.

Mr. Tim Renton: I have not had the benefit of reading the right hon. Gentleman's lecture, but does he not agree that, unless some details of the common agricultural policy can be renegotiated at Geneva, there is a danger of the Geneva negotiations being fouled up altogether? Further, will he seek at Geneva to obtain some redefinition of anti-dumping?

Mr. Dell: As for whether the negotiations are likely to be fouled up, I believe that there is now a better understanding in Washington of the position of the European Community in respect of agricultural policy. I discussed this matter when I was in Washington, and I do not believe—although, of course, no one can at this stage guarantee it—that the problems of agriculture will prevent the successful outcome of the multilateral trade negotiations. As for anti-dumping, one of the issues which, I know, a number of countries involved in the multilateral trade negotiations wish to discuss is the problem of subsidies, and we should certainly like to see the United States Government bring their domestic legislation on countervailing into line with what was agreed by the constituent Powers many years ago.

Car Imports

Mr. Shersby: asked the Secretary of State for Trade what was the total import penetration of the British car market by foreign producers for the first three months of this year compared with the same period of 1976.

Mr. Meacher: According to figures from the Society of Motor Manufacturers and Traders, import penetration of the United Kingdom car market in the first three months of 1977 was 42·8 per cent., compared with 34·7 per cent. in the same period last year.

Mr. Shersby: Does the hon. Gentleman realise that the situation is still giving rise to considerable concern and that in January this year, for example, we exported only 103 British cars to Japan, compared with 162 in the same month last year? What improvement does the hon. Gentleman expect in the export of parts and components to Japan as a result of the buying mission which came to Britain in March?

Mr. Meacher: Certainly I agree with the hon. Gentleman that there is considerable concern about the trading position in respect of our motor car industry. The basic problem remains that we have to produce sufficient cars to meet domestic demand and also the demands of overseas markets. With regard to the export of commercial vehicles and components, we have a very substantial surplus, although certainly in the case of trade with the EEC it does not match the deficit on trade in cars. I cannot give a direct answer to the hon. Gentleman's last point but will certainly let him know.

Mr. Ioan Evans: What estimate has been made of the possible total import penetration if the policy of the Conservative Party had been pursued and British Leyland had been allowed to collapse and Chrysler had withdrawn from this country? Will my hon. Friend in a positive way support the "Buy British" campaign to help the British car industry in this country?

Mr. Meacher: The consequences had British Leyland and Chrysler been allowed to collapse are virtually unimaginable. There can be absolutely no question of this, whatever Opposition Members may say while they remain in Opposition. With regard to the point about the "Buy British" campaign, there is a major difference between us and some of our competitors inasmuch as there is a natural nationalistic desire on the part particularly of the Germans and the Japanese to buy their own products. That desire does not, for various reasons which can be conjectured, appear to be developed here to the same extent. I assure my hon. Friend, however, that we are very well aware of this and that, in ways which I cannot publicise, we are seeking to take measures in this direction.

Mr. Hal Miller: Is the Under-Secretary able to relate the import penetration to production figures in this country for the first three months of this year? Can he also tell the House whether his Department will be making representations to the Government about the new Mini development and its place in international trade?

Mr. Meacher: I cannot closely relate import penetration levels and production in the first three months, particularly

because, following disputes such as those we have seen, although certainly some sales are less and increased imports result, there may be a delay rather than a loss in other cases. The new Mini is a matter for my right hon. Friend the Secretary of State for Industry, and certainly close consultations about this are going on at the present time.

Ms Colquhoun: Will my hon. Friend liaise with his right hon. Friend the Chancellor of the Exchequer about the unfair competition which exists between those who sell British cars and those who sell foreign cars? Will he accept that there is a great economic and financial advantage to the car purchaser to take up an offer from Fiat, Datsun, Toyota and Volkswagen because of their low interest charges? Does he further accept that in this respect the position when buying from British Leyland militates very unfairly against the British car industry, and that this is one of the major factors in persuading the British buyer to buy foreign cars? Will he accept that it is simply a matter of economics and that there is unfair boosting from foreign Governments? Finally, will he deal with this situation?

Mr. Meacher: The differential in interest rates makes a considerable difference, as my hon. Friend spelt out It is the Government's firm intention, as one of our central aims in our economic policies, to reduce the level of interest rates in this country. I do not think there can be any question of subsidising the interest rate in the way that my hon. Friend seemed to suggest, but interest rates have come down very considerably in the last four months and I hope that they will continue to do so.

Latin America

Mr. Michael McNair-Wilson: asked the Secretary of State for Trade what discussions he has had with the Chairman of the British Overseas Trade Board about export promotion in Latin America.

Mr. Meacher: I am in regular contact with the Chairman of the British Overseas Trade Board about the board's export promotion activities, including those in Latin America.

Mr. McNair-Wilson: The Minister must be extremely worried about our lack


of success in Latin America. Is he aware that only 2·9 per cent. by value of our exports went into that market in 1976, and that that was a lower figure than in 1974 or 1975? Will he say what fresh impetus the Government intend to give to marketing in that area?

Mr. Meacher: Although the hon. Gentleman is quite right to quote the figure of 2·9 per cent., it compares favourably with the 2·5 per cent. for our visible exports to the Eastern bloc, Russia and Eastern Europe, and is by no means insignificant.
With regard to fresh initiatives, in the last couple of years we have organised two major British industrial exhibitions in Sao Paulo and Caracas. In Brazil, too, our largest market, we have substantially increased both our trade and investment. We recently signed a memorandum of understanding that identified particular areas for co-operation when we are trying to get increased industrial development.

Mr. Ronald Atkins: What are the prospects of exports of British engineering products such as the high-speed train and the advanced passenger train, in view of the extension of railways in Latin America?

Mr. Meacher: I am sure that they are considerable. At the time of the visit of the President of Brazil we signed economic agreements with that country about steel and rail development plans, in each case worth probably well over £100 million. I hope that the rolling stock that goes with the rail manufacture will follow this.

Mr. McCrindle: Is the Minister aware of the considerable advances being made in selling to Chile by countries such as France and Germany? Notwithstanding the Government's well-known attitude to the political régime in that country, will the Minister make clear that he has no objection to the expansion of trade with it?

Mr. Meacher: As has been made clear by my right hon. Friend's predecessor, although we have embargoed military supplies, normal facilities are made available for trade with Chile and ECGD cover is available subject to normal review and normal underwriting criteria.

Civil Aviation (Bermuda Agreement)

Mr. Tebbit: asked the Secretary of State for Trade what progress he has made towards the renegotiation of the Bermuda Agreement.

Sir George Young: asked the Secretary of State for Trade if he will report on the progress being made by his officials in the renegotiation of the Bermuda Agreement.

Mr. Dell: The fifth round of negotiations for a new Air Services Agreement was held in Washington from 28th March to 22nd April. During my visit there on 26th and 27th April I reviewed the position reached with the United States Ministers concerned. Although some progress has been made, there are important issues still to be resolved. Negotiations resume in London on 16th May and I hope that we can reach agreement before the old agreement terminates on 22nd June.

Mr. Tebbit: Does the Secretary of State expect—as opposed to hope—to get a new agreement before the old one expires on 26th June? Does he still think that it was a very clever idea to start the renegotiations six months before the change of Administration in the United States? Will he say whether he thinks that the matter of New York landing rights for Concorde being negotiated at the same time has made it more difficult or less difficult to arrive at an advantageous Bermuda Agreement for the British carriers?

Mr. Dell: I hope that there will be an agreement by 22nd June. I think there are grounds in the negotiations to make that hope justifiable—that there will be an agreement by 22nd June. But, of course, I cannot give any guarantee. There are still some substantial matters outstanding between the two Governments.
The hon. Member asked whether it was sensible to start renegotiations six months before the change of Administration. It seems to me to have been right to do it then. I know of nothing that persuades me that it was not right to do it then. It has proved possible in the last few


months—notably in the round of negotions just ended—to discuss the matter substantially and, as I said in my original answer, to make some progress. I do not think the fact that we had a six months' ground-clearing period before that has hindered the situation. It has obviously helped.
With regard to whether the negotiations concerning landing rights for Concorde in New York have harmed or hindered the situation, we now await the decision of the judge in the New York court on that question, and I have no comment to make. I have certainly indicated to the United States authorities that the subject of Concorde was a serious element in the negotiations at Washington. It will now unfortunately be the courts—I should have preferred it to be the Port of New York Authority—that will resolve this matter.

Sir G. Young: Will the Secretary of State tell the House whether the prospects of getting the Skytrain service accepted in America have been improved by the present difficulties in renegotiating the Bermuda Agreement?

Mr. Dell: I do not think that the renegotiations have affected the prospects for Skytrain one way or another. The hon. Gentleman will know that, as I announced in the House, we are trying to get Skytrain into the United States by means of a separate memorandum of understanding. I discussed this matter with United States Ministers when I was in Washington. The hon. Gentleman may know that the Department of Transportation has announced that it is in favour of Skytrain being allowed into the United States. That is a most helpful decision by that Department. We now await the recommendation of the CAB and eventually the decision of the President. As I have made perfectly clear, the willinginess of the British Government to support Skytrain is an indication that we, too, believe in competition.

Mr. Donald Stewart: Will the Secretary of State oppose attempts by American airlines to abolish their favourable rate for air freight under an agreement made with the shipping agents of British airlines in view of the great assistance that it has been to the textile and other industries?

Mr. Dell: I should prefer to look into that question and then to write to the right hon. Gentleman.

Scotch Whisky Exports

Mrs. Bain: asked the Secretary of State for Trade what is the current level of exports of Scotch whisky; and how this compares with the level 10 years ago.

Mr. Meacher: In the 12 months ending March 1977, 93 million proof gallons of Scotch and Northern Irish whisky was exported compared with 42 million gallons in the same period ending March 1967.

Mrs. Bain: Will the Under-Secretary bear in mind the unique qualities of this particular asset as a major dollar earner and source of employment in Scotland? Does he agree that it is time that these unique qualities were protected by the Government? Will he look in particular at the question of single malt whiskies and do everything possible to prevent the export of bulk shipments of this particular brand of whisky, as importers in many countries are now watering it down with inferior local rye whiskies, to the detriment of the good name of Scotch whisky?

Mr. Meacher: I shall certainly look into the matter raised by the hon. Lady. I should point out that in the last five years there has been only a very slight increase in the share of total Scotch whisky exports taken by bulk exports—about ½ per cent. up to 29½ per cent. There is no guarantee that restrictions would promote equal exports of bottled Scotch. In fact, restrictions on bulk ex, ports would probably invite retaliation against bulk imports of other drinks, such as rum and table and fortified wines for bottling here.

Mr. Canavan: Is my hon. Friend aware that for once I agree with everything said by the hon. Member for Dunbartonshire, East (Mrs. Bain)? Is he further aware that there is great concern among trade unionists in the Scotch whisky trade about the increasing trend towards bulk rather than bottled exports? Will he tell the distillers that that is harming not only employment prospects for workers in the bottling industry in Scotland and elsewhere but the international reputation of Scotch whisky, because many


unscrupulous importers are bringing in good-quality Scotch whisky in bulk, mixing it with foreign rubbish, then bottling it and selling it under a Scotch label?

Mr. Meacher: I shall certainly look at the balance of interest here in preserving both the unique reputation of Scotch whisky and employment in bottling it without losing the employment which we get from bottling imported wine and rum.

Company Directors (Statutory Obligations)

Mr. Michael Marshall: asked the Secretary of State for Trade how many reminder letters have been sent to directors of a company in default of their statutory obligation during the last 12 months; and how many of those involved were deceased theatrical managers.

Mr. Clinton Davis: In the 12 months to 31st March, the Registrar of Companies for England and Wales sent some 45,000 reminder letters to persons notified to him as directors. It is not possible to say how many of these letters may have been addressed to theatrical managers, deceased or otherwise. My Department's objective is to secure increased compliance with the law by the living rather than to engage in spiritual communication with the dead.

Mr. Tebbit: Then what is the Liberal pact about?

Mr. Marshall: I thank the Under-Secretary for that assurance. Does he recognise that this Question follows an earlier Question which I put down to his Department asking why it was making frenzied attempts to contact the late Mr. Arthur Bouchier, the ghost of the Garrick Theatre? Would it not be helpful if the Department saved the taxpayers' money by ending the reminder system, or at least if its officials read history—preferably theatrical history?

Mr. Davis: The hon. Gentleman is probably making his last positive appearance on this matter. Mr. Bouchier was a famous actor-manager, I gather, at the Garrick Theatre. It may be noteworthy that two of his longest-running productions were "The Golden Silence" and "The Arm of the Law". We have not been in a state of frenzy about this matter.

It would be helpful if directors of companies—I am talking of the living rather than of spirits—advised the Companies Registry when one of their number departed this soil.

Mr. Anthony Grant: More generally and seriously, is the hon. Gentleman aware that the irresponsibility of a relatively small number of companies in not complying with their obligations under the Companies Act is not only a serious clog on commercial practice but very damaging to the overburdened majority, particularly of small firms, which try to wrestle with the matter? Is he aware that he would have the support of the House if he clamped down rigorously on the minority?

Mr. Davis: The hon. Gentleman is quite right. We stepped up the number of prosecutions quite dramatically in 1976, more or less doubling the figure for the previous year. I hope that the hon. Gentleman's observations will be taken to heart where it really matters.

British Airways (Chairman)

Mr. Goodhart: asked the Secretary of State for Trade when he last met the Chairman of British Airways.

Mr. Clinton Davis: My right hon. Friend met Sir Frank McFadzean and his board members on 31st March.

Mr. Goodhart: Has the Minister had any discussions with the Chairman of British Airways about an approach to IATA in order to seek a reduction in the excessively high surcharge on Concorde fares which is likely to price Concorde out of the market, even if it is allowed to land in the United States?

Mr. Davis: There have been no such discussions.

Mr. Hoyle: Does my hon. Friend agree that it would have been better to appoint as Chairman of British Airways someone who believed in public ownership rather than someone who spent his time writing pamphlets for a centre run by the right hon. Member for Leeds, North-East (Sir K. Joseph)?

Mr. Davis: My right hon. Friend and I are concerned to have as Chairman of British Airways somebody who cares about the corporation and has proved


and is proving his ability to carry out that job well. I believe that that is true of Sir Frank McFadzean. My right hon. Friend the Prime Minister has already made comments on Sir Frank's extraordinary political and economic views in other regards.

Mr. Geoffrey Finsberg: When the Minister next meets the Chairman of British Airways, will he suggest to him that he takes a holiday abroad on a package tour, travels with the Chairman of the British Airports Authority and, when landing at Heathrow or Gatwick, experiences all the frustrations which ordinary people face instead of the red carpet treatment which he normally finds?

Mr. Davis: I think that the Chairmen of British Airways and of the British Airports Authority are fully aware of the present difficulties at Heathrow and Gatwick. The hon. Gentleman knows that extensive changes are taking place at both those airports, and one unfortunate consequence is inconvenience to passengers. I hope that when the developments have taken place considerable advantage will be gained by passengers.

Companies (Audit Committees)

Sir B. Rhys Williams: asked the Secretary of State for Trade if he will make a statement of his views as to the value to companies of appointing audit committees in accordance with North American practice; and if it is his intention to propose that the appointment of audit committees should now be made statutory in certain classes of company.

Mr. Clinton Davis: Proposals for the establishment of audit committees deserve attention and, as the hon. Member will recall from an answer I gave him on 14th February, they are being examined alongside the more fundamental reappaisal of the structure of companies following publication of the Bullock Report.

Sir B. Rhys Williams: Will the Minister bear in mind the good sense of the New York Stock Exchange authorities, which have not only made absolutely clear their intention that all companies quoted in New York must have audit committees by the end of 1978 but left plenty of time for the companies to make the necessary preparations and for people suitably qualified for this work to prepare themselves for their responsibilities?

Mr. Davis: I am aware of the advantages which are claimed for this practice, not only in the United States but in Canada, and the hon. Gentleman does not allow me to forget that. This matter must fall within the general review of company law which relates to the publication of the Bullock proposals.

OFFICIAL REPORT (CORRECTION)

Mr. Speaker: I have a short statement to make to the House. I undertook last Thursday to inquire into the complaints made by the right hon. Member for Knutsford (Mr. Davies) about the alteration of Hansard. I have since consulted the Editor of Hansard and have personally examined the original transcripts. As a result of this examination, I am satisfied on two points.
First, the word "always" was indeed used by the Prime Minister in the context to which the right hon. Member for Knutsford referred. Secondly, the omission of the word from the record was due to a simple administrative slip on the part of the staff of the Official Report. There is absolutely no evidence to suggest that it was done deliberately or following any intervention.
The two shorthand records of the Prime Minister's words contained two different versions—one including the word "always" and one without it. These two versions should have been checked and reconciled before being printed, but because of an oversight this was not done. I have since taken steps to have the record corrected.
We should all remember the devoted service given to the House by the Hansard staff, often under conditions of great difficulty, and we should be very grateful for the care that they take to record our words in this Chamber.

Mr. John Davies: I thank you for going into this matter, Mr. Speaker. I endorse your words on the subject of the Hansard staff, who have always given me the greatest help and consideration.
Naturally, I withdraw any kind of suggestion that the Prime Minister or anyone acting on his behalf sought to intervene on this matter.
The correction to which you have referred leaves the matter of substance


enduring, and of course we shall want to pursue that with the Prime Minister in the normal way.

HEADS OF GOVERNMENT (DOWNING STREET MEETING)

The Prime Minister (Mr. James Callaghan): With permission, Mr. Speaker, I should like to make a statement on the Downing Street Summit, which was attended by the Presidents of France and of the United States, and the Prime Ministers of Canada, France, Italy and Japan and the Chancellor of the Federal Republic, as well as the Finance and Foreign Ministers of the countries represented, and yesterday by the President of the European Commission.
Nearly a year has elapsed since our meeting in Puerto Rico, and there was a general wish among the leaders of the major industrial democracies to consult, to exchange experiences and ideas and to harmonise as far as possible our responses to our shared problems, recognising that our well-being is bound up together. Our discussion had the purpose of agreeing a common analysis, and so a common approach.
We have been able to share our views with the new American Administration and to review the state of the world's economy and examine our present policies as a whole. We have reviewed our policies to combat inflation and unemployment and discussed the policies that will be needed to reach a successful conclusion of the Conference on International Economic Co-operation. We also readily responded to President Carter's call for a close examination both of the need to conserve energy and of the dangers of nuclear proliferation.
Let me briefly restate seven target areas where we pledged ourselves to action. First, we agree that our most urgent task is to create more jobs, including special measures for young people, and that hand in hand with the fight against unemployment is the fight against inflation. Inflation destroys jobs, corrodes democracy and undermines economies strong and weak.
Secondly, Heads of Government committed themselves to maintain their tar-

gets for economic growth or for stabilisation policies. We recognised that growth rates must be maintained in the stronger economies, increase in the weaker economies, and inflation tackled successfully in both, if we are to cut unemployment and provide a basis for sustained non-inflationary growth.
If countries concerned seem likely to fall short, they will adopt further policies to achieve their targets. This should give added stability and confidence.
Thirdly, we committed ourselves to seek more resources for the International Monetary Fund and to support the link between its loans and the adoption of appropriate stabilisation policies. Such facilities are essential if countries now in balance of payments deficit are to maintain reasonable levels of internal activity and foreign trade so that the world can avoid the danger of new trade and payment restrictions.
The danger of new trade restrictions also prompted our fourth pledge: that we would work to expand opportunities for world trade by giving a new impetus to the multilateral trade negotiations originally launched at Tokyo in 1973, whilst not removing the right of individual countries to avoid significant market disruption.
In view of the increase in demand for energy and oil imports, which is placing increasing pressure on finite sources of fuel, we pledged ourselves to greater energy conservation and agreed on the need for greater exchanges of technology, joint research and development for the efficient use of energy sources, including the improved production and use of coal.
This brought us face to face with the nuclear dilemma. The present generation has an awesome responsibility for the future of mankind. We agreed to launch an urgent study, the first stage of which we intend will be completed within two months, of how to reconcile the world's demand for nuclear weapons. Our initial studies will be concerned with the terms of reference for evaluating the nuclear fuel cycle internationally.
Our seventh pledge was to the world's poor, for whom the impact of the oil crisis and the world recession has been devastating. The countries attending the Summit agreed to do all in their power by means of trade, aid and finance to help the developing countries towards a just share in


the sustained growth of the world economy. We should work for a successful conclusion of the CIEC in Paris at the end of the month. We also invite the COMECON countries to join us in this, the only war worth fighting—the war on want.
We placed on record a welcome for the work being done to achieve international agreement to eliminate irregular practices in international trade, banking and commerce.
The text of the Downing Street Declaration, together with the fuller Appendix issued with it, will be published in the Official Report.
Mr. Speaker, all of us recognised the difficulties of raising standards, or in certain countries even of maintaining them, and the problem of overcoming unemployment. But we shared a common determination to succeed, and we ended our discussions with the confidence that our democratic systems have the resilience and the inner strength to surmount our present difficulties.
It is our perception that the world economy is one and must be managed increasingly as one. This weekend the seven leading industrial democracies pledged themselves to a programme aimed not simply at their own future prosperity but in working for that prosperity to be more fairly shared in a safe and peaceful world.
Mr. Speaker, all of us recognised the difficulties of raising standards, or in certain countries even of maintaining them, and the problem of overcoming unemployment. But we shared a common determination to succeed, and we ended our discussions with the confidence that our democratic systems have the resilience and the inner strength to surmount our present difficulties.
It is our perception that the world economy is one and must be managed increasingly as one. This weekend the seven leading industrial democracies pledged themselves to a programme aimed not simply at their own future prosperity but in working for that prosperity to be more fairly shared in a safe and peaceful world.

Mrs. Thatcher: I thank the Prime Minister for making that statement, and also congratulate him on having the Summit at Downing Street and on his part in presiding over it.
I have three points to put to him. Because I received his statement only shortly before he rose, I took the opportunity to look at other communications from other similar conferences in Rambouillet and Puerto Rico. I found that they are all very similar in what they say about inflation, unemployment, the need for recovery without inflation, the need not to have protectionism, to conserve energy and to renew confidence. Will the Prime Minister agree that one should not expect too much to emerge in practical terms from the Summit? This is a serious point: will he agree that the greatest value of such conferences is the meeting and understanding between the

leaders of the great industrial nations which, in itself, is worth achieving?
Will he be bringing forward any practical proposals as a result of this Summit? Will he agree that the most practical item to emerge—and we welcome it—is the help to the Third World and the decision to establish a fund to stabilise commodities?
Finally, as this was a very important conference, what steps did he or any other Heads of State or Ministers from other countries take to see that women are represented at these conferences?

The Prime Minister: I thank the right hon. Lady for her courteous comments at the beginning of her questions. It is true that the communiqués are similar when we meet, but I think that that is the measure of the depth and complexity of the problems that the world now faces. It was interesting that the Prime Minister of Japan had been present in London during the 1930s. He made an interesting contribution, in which it was made clear that the problem of unemployment now is totally dissimilar from the problem as it existed in the 1930s, and indeed from the problems of the period before 1973. It is for these reasons that the Heads of Government and Heads of State need to meet at regular intervals. I agree with the right hon. Lady about that.
I do not think that enough credit has been given to the world for the successes which have been achieved, bearing in mind the pressures under which Heads of Government have been from their electorates and their own people to introduce restrictive and protectionist measures. There has been a common perception that this would lead the world into something much more like the 1930s. The fact that we have been meeting has enabled us to resist those pressures, which, however tempting they might seem in the short term, would be very damaging to world trade in the long run.
As for practical proposals, one of the more important matters to emerge has been the agreement to monitor the rates of growth of world trade in our countries, especially in those which are growing faster, so that if they fall short they have committed themselves to take new measures to ensure that they attain those targets. That is very important as a means of enhancing confidence and stability in


the business community and elsewhere that investment decisions have to be taken.
As for the Third World, there were a number of proposals there on which we are working in order to bring the CIEC to a successful conclusion—such matters as stabilisation of certain export prices, if that can be achieved; funds to assist where stocks sometimes get too high, or, indeed, too low; funds perhaps to assist those countries which are deeply in debt at the moment and which suffer more than any of us. All these proposals are under consideration.
I would say to those who doubt the value of these meetings that it is not our job at these conferences—I have always taken this view—to produce a blueprint for the future. What we must try to do there is get political impetus for the direction in which we should go. Then that should be fitted into the various international bodies—the IMF, the OECD, UNCTAD and the others, of which we are part only of the membership—in order to ensure that they get results.
On the right hon. Lady's last question, I regret that no ladies were present. I shall certainly take note of her application for the post, but I cannot say that she will necessarily find that she will be successful.

Mr. David Steel: May I join the Leader of the Opposition in congratulating the Prime Minister on his personal success at this summit?

Mr. Cormack: Why were you not there?

Mr. Steel: I should like to ask two particular questions. What contribution will our own Government make to the study of the danger of nuclear proliferation? Second, after this meeting, has the position of the President of the European Commission at future Summits of this kind been regularised?

The Prime Minister: On the first question, we are in a favourable position to make a contribution on this matter because we are in the forefront of nuclear technology. Therefore, we shall be playing a large part in the small group which is to be set up on this matter. I hope that when we get the report, inside two months, we shall then be able to see

whether we can proceed to the next stage that President Carter is very keen about—the international fuel cycle evaluation—and to see which fuel cycle would be most appropriate to the world and whether we can get some agreement on that to safeguard the world against the risks.
The future position of the President of the Commission is a matter for the Community itself to deal with and not for that conference as it stood.

Mr. Faulds: Whilst warmly congratulating my right hon. Friend on the success of this seven leaders' conference and his personal contribution to it, may I ask whether he seriously believes that not only the COMECON countries but also Japan will respond more readily and liberally to the needs of the Third World?

The Prime Minister: These matters were discussed with the Japanese Prime Minister present and I had a bilateral discussion with him about this and about Japan's trading policies at Downing Street after the Summit Conference had concluded. It is not for me to speak for Mr. Fukuda, or perhaps to go into detail about what was said, but certainly he was the one who pointed out the problems of the existing situation in the world from his previous experience, going back about 40 years. I hope therefore that he will follow up his analysis with the appropriate conclusions.

Mr. Anthony Grant: As the priority seems now to be to conquer unemployment, did the Prime Minister in his discussions with President Carter get the impression that it is absolutely no part of United States policy to use protectionism, either general or narrow, to conquer their own unemployment problems in any particular field?

The Prime Minister: Everyone is under pressure in this area, including the President of the United States. He is resisting these pressures in the case of some elements of trade but not in the case of others. In all cases, certain political decisions will be taken by Governments. However, what is important is that by our standing together the general onrush for protectionism has been resisted. The resistance has become a little frayed at the edges in a number of cases, but we have achieved more success than I would


have expected in this area. The President of the United States, like the remainder of us, is satisfied that to depart from that general principle would mean more unemployed in the world and not fewer.

Mr. Conlan: Would my right hon. Friend please convey to President Carter the warm thanks of the people of the North-East for the pleasure and joy that he brought to their region on Friday during an all-too-brief visit?

The Prime Minister: The President thoroughly enjoyed himself on Friday. I always thought that the people of the North-East would give him a warm welcome, and they did. I am sure that not only will he never forget it but that it has strengthened the bonds of affection between him and this country.

Mr. Forman: Since it is envisaged that the evaluation of the nuclear fuel cycle which the experts will conduct may take as long as a year, was it agreed that in the meantime Britain and other countries which are engaged in the nuclear fuel cycle business should not go ahead with overseas reprocessing contracts?

The Prime Minister: The work in the nuclear suppliers' club will continue, of course, on the matter of safeguards. As regards our own possible contracts for reprocessing, until we can conclude such an agreement on these matters as the hon. Gentleman has mentioned, we shall have to reach our own conclusions, as will the United States, on the export of uranium. We are all still free to do that, but I hope that all of us in reaching our conclusions will take into account the general principles on which we based ourselves yesterday.

Mr. Atkinson: Will my right hon. Friend accept that the House will be thrilled to learn from him that the British Government now have much more confidence in British nuclear engineers than they have had in the past and that he is now confident that we can take world leadership in these matters? In regard to the report that my right hon. Friend will now submit to the meeting of the rich and the poor countries on 31st May, before that report on nuclear affairs goes forward will he give some consideration to the political problems which exist, in the sense that, in the United States, Germany

and elsewhere, nuclear reactors and the nuclear indutry are mainly in the control of the private sector? This means that the Government control is somewhat limited over the contracts which those industries are likely to place with the poorer countries. In this country, we are fortunate in having public ownership of the nuclear industry. Therefore, will my right hon. Friend have further consultations with the committee of experts which has now been set up to see whether a common solution can be found to overcome this difficulty of the nuclear industry elsewhere remaining in private hands?

The Prime Minister: The manufacture of reactors in this country is in private hands, too, as it is in the United States or, indeed, in France. But Governments have the responsibility to impose safeguards upon the circumstances in which these reactors should be exported, the nature of the reactor and what safeguards should be evolved for the use of the spent fuel. All of these things must be overseen by Governments irrespective of whether the manufacture of the particular reactor is in private or in public hands.

Mr. Henderson: Is the Prime Minister aware that we generally welcome the view that means must be found to deal with unembployment? Does that mean that there is to be a shift in Government policy to laying stress on reducing unemployment rather than reducing inflation?

The Prime Minister: No, it does not. Inflation and unemployment go hand in hand. One depends on the other. One can, of course, have a low level of inflation and a high level of unemployment as, indeed, the Federal Republic has at present. This is one of the difficulties that has led experts and authorities to conclude that the present recession is different in form from that before 1973 and certainly from that before the war.
Our position is really quite straightforward. The smaller the increase we have in earnings this year, the lower will be our rate of inflation next year. There is a direct correlation between the two. That is our task. If we have too high a settlement, our rate of inflation will be much too high in itself. Our task is to get down the rate of inflation but at the same time to take special measures, which we can take, including


those for young people, in order to lessen the impact of unemployment.

Mr. Jay: Does the Summit Declaration against protectionism apply to agricultural as well as to industrial goods?

The Prime Minister: That was one of the most difficult topics we had to discuss because the United States and Canada clearly have a particular interest in this and some member countries of the Community have a different interest. But we cannot solve the trading problems of the one without regard to the social problems of the other. Certainly, there is a desire to ensure that protection should be lessened in agricultural goods as well as in industrial goods, but I have a feeling that we are likely to make faster progress on the second than on the first.

Mr. Baker: Will the Prime Minister accept that many hon. Members on both sides of the House welcome the fact that the Summit turned its face against "beggar my neighbour" protectionism? Will the right hon. Gentleman agree to give the House an indication of any changes in Government policy which will follow the Summit? Does the British Government intend to go for more growth than that envisaged by the Chancellor in his Budget Statement? If the Government intend to do that, how can that be reconciled with their statement to control the rate of inflation?

The Prime Minister: The hon. Gentleman puts his finger on the crux of the problem. At the moment our task is to pursue our stabilisation policies as they have so far turned out. With the improvement in our balance of payments, which is undoubtedly now taking place, I believe that we shall see a further improvement as the months go by. Perhaps our situation will alter. But for the moment and for the time being our task is to pursue existing policies. The fast-growth countries who might appear to be falling behind in their growth rates—if they do so that would have an adverse influence on us—have pledged themselves to maintaining their fast growth rates or to review policies and take further steps to ensure that they are maintained later.

Mr. Alan Lee Williams: Will my right hon. Friend confirm whether he had any

discussions with President Carter regarding the standardisation of weapons within NATO?

The Prime Minister: Yes. There were talks outside the formal sessions. This is a matter in which President Carter is very interested and in which he would like to secure greater standardisation without necessarily giving all the advantages to the United States by so doing. It is something that he is quite sincere about, and he has also gone on public record with regard to his policies on the export of arms. I know that it is his desire that the export of arms in itself should be smaller.

Mr. Younger: Will the Prime Minister say whether the further studies on nuclear proliferation will include the question of the dumping of nuclear waste? If so, will he instruct all concerned in this country to suspend any applications for planning permission to look for sites for the dumping of nuclear waste until these studies are completed?

The Prime Minister: These studies will include this question, which is one of the most important questions. But it would be quite wrong to postpone planning decisions or to invite people not to go ahead with them until we have concluded our studies. We want to be ready to proceed in this field if we can be certain that there will be safety and that we are not endangering future generations. I see no reason why we should halt the preliminaries on this while these studies go on.

Mr. Molloy: Is my right hon. Friend aware that his arranging and chairing of this meeting is deeply appreciated not only by the people of our own country but indeed throughout the western countries and the developing lands in particular? Does he not also agree that what has been revealed at this Summit, which should have been called many years ago, is that the principle of laissez-faire competitive fighting has to be dropped and that there is now an urgent need for a form of universal co-operation? This ought to be monitored. Will he see to it that if possible the monitoring of these broad principles for a return to sensible world co-operation will be reported to this House from time to time?

The Prime Minister: I think the principal reason that we have held three conferences of this sort within a relatively


short period of time is the perception that the world economy is interdependent and that it must be increasingly managed as one. It cannot be left to free market forces in its entirety. There is a place, but not an excessive place, for market forces when we have 15 million people unemployed in the OECD countries. It is for this reason that the two must be combined. That is why I am a democratic Socialist and that is why Conservatives are just primeval monsters.

Mr. MacFarquhar: May I press my right hon. Friend on the question of Japan? In view of the widspread reports preceding the arrival of the Japanese Prime Minister can he say whether in bilateral or multilateral talks at the Summit the Japanese Prime Minister confirmed that he would be committing his Government rapidly and drastically to increase its aid giving in the near future or, if not, whether he at least indicated that his Government would be making a public announcement on this matter in the near future?

The Prime Minister: I cannot give an affirmative answer to either of those questions. The Japanese Prime Minister committed himself and his Government to the communiqué. That is as far I can go.

Mr. Stanbrook: Will the Prime Minisster now answer the question that he has been asked twice already? In what respects is British Government policy going to be changed as a result of this meeting or is it just another case of pious hopes and meaningless platitudes?

The Prime Minister: I have already answered that question very fully and satisfactorily, namely, that we continue with our existing policies. But what was more important in the case of this conference is that those countries which have set out to grow faster, because they have strong economies, have undertaken and committed themselves so to do and to take further steps if they look like falling short. We have all agreed that there should be monitoring of this process.
The hon. Gentleman should not assume that we are the only country attending to this. It is a common effort. Each country has to put into the deal what it can in order to achieve the world balance that is required. [Interruption.] The hon. Gentleman may snigger about this,

but that is the truth of the situation. Each of us has a different task to fulfil and we have a different rôle in the economic cycle. Each of us has to do different things.
Apart from that aspect on the economic side, what we discussed, for example, in relation to the developing countries and our relationship with them will be of assistance not only to them but to world recovery as a whole. The impact of the increased oil prices on them has been devastating. That is bound to affect our exports. It is bound to affect world trade. It is these things, which are indirect in our policies, which, if we can ensure that the IMF increases its resources, will, in the end, if we take advantage of the situation, enable our exports to grow. I ask the hon. Gentleman not to dismiss these things but to see them in the round. Let him try to see that the world is interdependent and that what others do may be as important to our economy as what we do ourselves.

Mr. Wrigglesworth: Will the Prime Minister tell the House how progress towards the objectives agreed last weekend will be reviewed—whether any machinery for monitoring progress has been established, or whether another meeting will be held in due course?

The Prime Minister: The progress will be reviewed and monitored, and I hope that the political impetus will be put into the OECD meeting next month and the meeting of the IMF in September. We are all ready, if necessary, to meet again if it seems appropriate to maintain the momentum of the recovery which has begun. We are remaining in touch through our own officials at all times, and it is fairly easy to get people together whenever we think it necessary.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: The House has had a very good run on this, but I shall call three more questions from each side.

Mr. Marten: On the question which the Prime Minister answered from the right hon. Member for Battersea, North (Mr. Jay) about agriculture, does this mean that Her Majesty's Government will implement their policy of importing more food from outside the Common Market, which policy is supported by the Conservative Opposition, and is not


this, therefore, against that primeval monster, the common agricultural policy?

The Prime Minister: The common agricultural policy needs revision—I have said this constantly—and it is the British Government's policy that it should be revised in our interests. At the same time, as I said in reply to an earlier question, there are big social consequences of such a revision for some of the other members of the Community. Therefore, it will take time to do it. The seven nations agreed yesterday that there should be a mutually acceptable approach to agriculture which will achieve increased expansion and stabilisation of trade and greater assurance of world food supplies. The hon. Gentleman can assume that Canada certainly and the United States probably will be pressing the European Community for more outlets for some of their agricultural produce. I am sure that a bargain will be struck in the end.

Mr. Skinner: Does my right hon. Friend recall that when the leaders met at Rambouillet there were about 1 million people on the dole in this country, that when they met at Puerto Rico another 200,000 had been added to the list, and that the total is now nearly 1·5 million? Do not those figures go to prove that these pious platitudes are not getting people back to work, any more than would the policy put forward by the Leader of the Opposition? In other words, capitalism has not got the answer. The answer is to be found, if my right hon. Friend wants to get down inflation, in freezing prices, if he wants to get people off the dole queue, in restoring the cuts in public expenditure, and, if he wants to do something for Britain, in getting us out of the Common Market?

The Prime Minister: That is a series of slogans which do not bear much relationship to reality.

Mr. Skinner: That is what they are saying on the streets.

The Prime Minister: That may be so. But the hon. Gentleman has a responsibility to give leadership as well as to listen to what people on the streets say.

Mr. Skinner: I am giving it.

The Prime Minister: Freezing prices is not a Socialist remedy. It has been applied in countries in Europe which are by no means Socialist and with the results that we have always known. These problems are more intricate and difficult than the hon. Gentleman seems to think. He has a dual responsibility, as I have. One is to ensure that our people are at work. The second is to preserve freedom in this country. He is a democratic Socialist, and the combination of the two is as important to him as it is to me. I know countries, as he does, where there is no unemployment. There is no freedom, either.

Mr. Rost: Was not the Prime Minister even a little embarrassed or ashamed to be acting as host and to be leading a Government who have dragged this country to the bottom of the league with shameful and disgraceful policies for stagnation, unemployment and inflation? Did he not pick up any tips at all?

The Prime Minister: The only factor which embarrasses me is when the Leaders of other nations have to read in Hansard that sort of comment.

Mr. Swain: In view of the fact that the nuclear energy programme took so long to discuss at the conference, and seeing that it will take 12 months to produce a preliminary report, will not the country's energy needs be in grave danger by the end of the century? Turning to a domestic matter arising from the conference, will the Prime Minister now tell the Secretary of State for Energy to instruct the Central Electricity Generating Board to go ahead with Drax B based on coal-firing?

The Prime Minister: My hon. Friend may have noted that, in my statement, I referred to the agreement that there should be an improved production and use of coal. As regards any specific power station, including Drax, my hon. Friend will know that it is not a shortage of power at present which is causing the hold up in this matter. It is other considerations concerning the future of the power plant industry. But that the power station, when it comes, will be coal-fired, I have no doubt.

Mr. Gow: What advice did the Prime Minister receive from his colleagues about the inflationary dangers of premature


reflation? Did he take the opportunity last weekend to repeat the undertaking which the Chancellor of the Exchequer gave to the Managing Director of the IMF on 15th December last that a continuing and essential element of Her Majesty's Government's economic strategy was a substantial reduction in the share of resources taken by the public sector?

The Prime Minister: The share of the resources taken by the public sector has, to my regret, been educed—[Interruption.] Yes, to my regret. It means that a number of essential public needs are not being met. That is why we say that our first task is to overcome inflation so that we may resume non-inflationary growth. That is the order of priorities and the way in which we intend to tackle this task.

Mr. Frank Allaun: What was said about stopping the nuclear and non-nuclear arms race? Is my right hon. Friend aware that many of us who held very high hopes of the President's earlier proposals have been greatly disappointed by his recent actions on this subject? Therefore, what did Britain do at this conference, and what initiative will it take on this issue?

The Prime Minister: The biggest problem that we have is the future of our nuclear fuel and what should be done about that. We all agreed—and my hon. Friend must have heard what I have said about three times already—about the need for a very urgent study of the way to control these matters. As for conventional arms, of course, this was not a negotiating conference for conventional arms, although my hon. Friend will know the position that we have taken on mutual and balanced force reductions. Although I do not wish to commit the President in any way, my hon. Friend is a little premature in his disappointment. The President is undoubtedly quite sincere and convinced about the need for reductions in these areas.

Following is the information:

DOWNING STREET SUMMIT CONFERENCE: DECLARATION

In two days of intensive discussion at Downing Street we have agreed on how we can best help to promote the well-being both of our own countries and of others.

The world economy has to be seen as a whole; it involves not only co-operation among national Governments but also strengthening appropriate international organisations. We were reinforced in our awareness of the inter-relationship of all the issues before us, as well as our own interdependence. We are determined to respond collectively to the challenges of the future.

—Our most urgent task is to create more jobs while continuing to reduce inflation. Inflation does not reduce unemployment. On the contrary it is one of its major causes. We are particularly concerned about the problem of unemployment among young people. We have agreed that there will be an exchange of experience and ideas on providing the young with job opportunities.

—We commit our governments to stated economic growth targets or to stabilisation policies which, taken as a whole, should provide a basis for sustained non-inflationary growth, in our own countries and world-wide, and for reduction of imbalances in international payments.

—Improved financing facilities are needed. The International Monetary Fund must play a prominent role. We commit ourselves to seek additional resources for the IMF and support the linkage of its lending practices to the adoption of appropriate stabilisation policies.

—We will provide strong political leadership to expand opportunities for trade to strengthen the open international trading system, which will increase job opportunities. We reject protectionism it would foster unemployment, increase inflation and undermine the welfare of our peoples. We will give a new impetus to the Tokyo Round of Multilateral Trade Negotiations. Our objective is to make substantive progress in key areas in 1977. In this field structural changes in the world economy must be taken into consideration.

—We will further conserve energy and increase and diversify energy production, so that we reduce our dependence on oil. We agree on the need to increase nuclear energy to help meet the world's energy requirements. We commit ourselves to do this while reducing the risks of nuclear proliferation. We are launching an urgent study to determine how best to fulfil these purposes.

—The world economy can only grow on a sustained and equitable basis if developing countries share in that growth. We are agreed to do all in our power to achieve a successful conclusion of the CIEC and we commit ourselves to a continued constructive dialogue with developing countries. We aim to increase the flow of aid and other real resources to those countries. We invite the COMECON countries to do the same. We support multilateral institutions such as the World Bank, whose general resources should be increased sufficiently to permit its lending to rise in real terms. We stress the importance of secure private investments to foster world economic progress.

To carry out these tasks we need the assistance and co-operation of others. We will seek that co-operation in appropriate international


institutions, such as the United Nations, the World Bank, the IMF, the GATT and OECD. Those among us whose countries are members of the European Economic Community intend to make their efforts within its framework.

In our discussions we have reached substantial agreement. Our firm purpose is now to put that agreement into action. We shall review progress on all the measures we have discussed here at Downing Street in order to maintain the momentum of recovery.

The message of the Downing Street Summit is thus one of confidence:

—In the continuing strength of our societies and the proven democratic principles that give them vitality;

—that we are undertaking the measures needed to overcome problems and achieve a more prosperous future.

8th May 1977.

APPENDIX TO DOWNING STREET SUMMIT DECLARATION

World Economic Prospects

Since 1975 the world economic situation has been improving gradually. Serious problems, however, still persist in all our countries. Our most urgent task is to create jobs while continuing to reduce inflation. Inflation is not a remedy to unemployment but one of its major causes. Progress in the fight against inflation has been uneven. The needs for adjustment between surplus and deficit countries remain large. The world has not yet fully adjusted to the depressive effects of the 1974 oil price rise

We commit our Governments to targets for growth and stabilisation which vary from country to country but which, taken as a whole, should provide a basis for sustained non-inflationary growth world-wide.

Some of our countries have adopted reasonably expansionist growth targets for 1977. The Governments of these countries will keep their policies under review, and commit themselves to adopt further policies, if needed to achieve their stated target rates and to contribute to the adjustment of payments imbalances. Others are pursuing stabilisation policies designed to provide a basis for sustained growth without increasing inflationary expectations. The governments of these countries will continue to pursue those goals.

These two sets of policies are interrelated. Those of the first group of countries should help to create an environment conducive to expansion in the others without adding to inflation. Only if growth rates can be maintained in the first group and increased in the second, and inflation tackled successfully in both, can unemployment be reduced.

We are particularly concerned about the problem of unemployment among young people. Therefore we shall promote the training of young people in order to build a skilled and flexible labour force so that they can be ready to take advantage of the upturn in economic activity as it develops. All of our Governments, individually or collectively, are taking appropriate measures to this end. We

must learn as much as possible from each other and agree to exchange experiences and ideas.

Success in managing our domestic economies will not only strengthen world economic growth but also contribute to success in four other main economic fields to which we now turn—balance of payments financing, trade, energy and North/South relations. Progress in these fields will in turn contribute to world economic recovery.

Balance of Payments Financing

For some years to come oil-importing nations, as a group, will be facing substantial payments deficits and importing capital from OPEC nations to finance them. The deficit for the current year could run as high as $45 billion. Only through a reduction in our dependence on imported oil and a rise in the capacity of oil-producing nations to import can that deficit be reduced.

This deficit needs to be distributed among the oil-consuming nations in a pattern compatible with their ability to attract capital on a continuing basis. The need for adjustment to this pattern remains large, and it will take much international co-operation, and determined action by surplus as well as deficit countries, if continuing progress is to be made. Strategies of adjustment in the deficit countries must include emphasis on elimination of domestic sources of inflation and improvement in international cost-price relationships. It is important that industrial countries in relatively strong payments positions should ensure continued adequate expansion of domestic demand, within prudent limits. Moreover these countries, as well as other countries in strong payments positions, should promote increased flows of long-term capital exports.

The International Monetary Fund must play a prominent rôle in balance of payments financing and adjustment. We therefore strongly endorse the recent agreement of the Interim Committee of the IMF to seek additional resources for that organisation and to link IMF lending to the adoption of appropriate stabilisation policies. These added resources will strengthen the ability of the IMF to encourage and assist member countries in adopting policies which will limit payments deficits and warrant their financing through the private markets. These resources should be used with the conditionality and flexibility required to encourage an appropriate pace of adjustment.

This IMF proposal should facilitate the maintenance of reasonable levels of economic activity and reduce the danger of resort to trade and payments restrictions. It demonstrates co-operation between oil-exporting nations, industrial nations in stronger financial positions, and the IMF. It will contribute materially to the health and progress of the world economy. In pursuit of this objective, we also reaffirm our intention to strive to increase monetary stability.

We agreed that the international monetary and financial system, in its new and agreed legal framework, should be strengthened by the early implementation of the increase in


quotas. We will work towards an early agreement within the IMF on another increase in the quotas of that organisation.

Trade

We are committed to providing strong political leadership for the global effort to expand opportunities for trade and to strengthen the open international trading system. Achievement of these goals is central to world economic prosperity and the effective resolution of economic problems faced by both developed and developing countries throughout the world.

Policies on protectionism foster unemployment, increase inflation and undermine the welfare of our peoples. We are therefore agreed on the need to maintain our political commitment to an open and non-discriminatory world trading system. We will seek both nationally and through the appropriate international institutions to promote solutions that create new jobs and consumer benefits through expanded trade and to avoid approaches which restrict trade.

The Tokyo Round of multilateral trade negotiations must be pursued vigorously. The continuing economic difficulties make it even more essential to achieve the objectives of the Tokyo Declaration and to negotiate a comprehensive set of agreements to the maximum benefit of all. Toward this end, we will seek this year to achieve substantive progress in such key areas as:

(i) a tariff reduction plan of broadest possible application designed to achieve a substantial cut and harmonisation and in certain cases the elimination of tariffs;
(ii) codes, agreements and other measures that will facilitate a significant reduction of non-tariff barriers to trade and the avoidance of new barriers in the future and that will take into account the structural changes which have taken place in the world economy;
(iii) a mutually acceptable approach to agriculture that will achieve increased expansion and stabilisation of trade, and greater assurance of world food supplies.

Such progress should not remove the right of individual countries under existing international agreements to avoid significant market disruption.

While seeking to conclude comprehensive and balanced agreements on the basis of reciprocity among all industrial countries we are determined, in accordance with the aims of the Tokyo Declaration, to ensure that the agreements provide special benefits to developing countries.

We welcome the action taken by Governments to reduce counter-productive competition in officially supported export credits and propose that substantial further efforts be made this year to improve and extend the present consensus in this area.

We consider that irregular practices and improper conduct should be eliminated from international trade, banking and commerce, and we welcome the work being done toward

international agreements prohibiting illicit payments.

Energy

We welcome the measures taken by a number of Governments to increase energy conservation. The increase in demand for energy and oil imports continues at a rate which places excessive pressure on the world's depleting hydrocarbon resources. We agree therefore on the need to do everything possible to strengthen our efforts still further.

We are committed to national and joint efforts to limit energy demand and to increase and diversify supplies. There will need to be greater exchanges of technology and joint research and development aimed at more efficient energy use, improved recovery and use of coal and other conventional resources, and the development of new energy sources.

Increasing reliance will have to be placed on nuclear energy to satisfy growing energy requirements and to help diversify sources of energy. This should be done with the utmost precaution with respect to the generation and dissemination of material that can be used for nuclear weapons. Our objective is to meet the world's energy needs and to make peaceful use of nuclear energy widely available, while avoiding the danger of the spread of nuclear weapons. We are also agreed that, in order to be effective, non-proliferation policies should as far as possible be acceptable to both industrialised and developing countries alike. To this end, we are undertaking a preliminary analysis to be completed within two months of the best means of advancing these objectives, including the study of terms of reference for international fuel cycle evaluation.

The oil-importing developing countries have special problems both in securing and in paying for the energy supplies needed to sustain their economic development programmes. They require additional help in expanding their domestic energy production and to this end we hope the World Bank, as its resources grow, will give special emphasis to projects that serve this purpose.

We intend to do our utmost to ensure, during this transitional period, that the energy market functions harmoniously, in particular through strict conservation measures and the development of all our energy resources. We hope very much that the oil-producing countries will take these efforts into account and will make their contribution as well.

We believe that these activities are essential to enable all countries to have continuing energy supplies now and for the future at reasonable prices consistent with sustained non-inflationary economic growth: and we intend through all useful channels to concert our policies in continued consultation and cooperation with each other and with other countries.

North/South Relations

The world economy can only grow on a sustained and equitable basis if developing countries share in that growth. Progress has been made. The industrial countries have maintained an open market system despite


a deep recession. They have increased aid flows, especially to poorer nations. Some $8 billion will be available from the DA for these nations over the next three years, as we join others in fulfilling pledges to its Fifth Replenishment. The IMF has made available to developing countries, under its compensatory financing facility nearly an additional $2 billion last year. An International Fund for Agricultural Development has been created, based on common efforts by the developed OPEC, and other developing nations.

The progress and the spirit of co-operation that have emerged can serve as an excellent base for further steps. The next step will be the successful conclusion of the Conference on International Economic Co-operation and we agreed to do all in our power to achieve this.

We shall work:

(i) to increase the flow of aid and other real resources from the industrial to developing countries, particularly to the 800 million people who now live in absolute poverty; and to improve the effectiveness of aid;
(ii) to facilitate developing countries' access to sources of international finance;
(iii) to support such multilateral lending institutions as the World Bank, whose lending capacity we believe will have to be increased in the years ahead to permit its lending to increase in real terms and widen in scope;
(iv) to promote the secure investment needed to foster world economic development;
(v) to secure productive results from negotiations about the stabilisation of commodity prices and the creation of a Common Fund for individual buffer stock agreements and to consider problems of the stabilisation of export earnings of developing countries; and
(vi) to continue to improve access in a non-disruptive way to the markets of industrial countries for the products of developing nations.

It is desirable that these actions by developed and developing countries be assessed and concerted in relation to each other and to the larger goals that our countries share. We hope that the World Bank, together with the IMF, will consult with other developed and developing countries in exploring how this could best be done.

The well-being of the developed and developing nations are bound up together. The developing countries growing prosperity benefits industrial countries, as the latter's growth benefits developing nations. Both developed and developing nations have a mutual interest in maintaining a climate conducive to stable growth worldwide.

QUESTION OF PRIVILEGE

Mr. Max Madden: I should like to draw to your attention, Mr. Speaker, certain comments made recently by the hon. Member for Antrim, North (Rev. Ian Paisley). Today, I received the transcript of a BBC radio programme broadcast last Wednesday in which the hon. Member for Antrim, North, in an interview with a Mr. Claypole, referred to
the lewd and immoral, foul-mouthed, drunken Members of Parliament who are mouthing about Ulster at this time.
It would seem that this was an individual and collective smear on Members of this House. I should like to ask whether you would consider this as a matter of privilege. I apologise for raising this issue today. This is due only to the difficulty of obtaining transcripts from the BBC. Although I made requests on Thursday and Friday of the BBC, it was unable to supply me with a transcript of this programme until today.

Mr. Speaker: I am grateful to the hon. Member for Sowerby (Mr. Madden) for giving me notice of his intention to raise a question of privilege. I shall, of course, look into the matters to which he referred. But I must give him a little warning. I am afraid, at first glance, that I may find that it is barred by time. However, I shall look into it very carefully.

BILL PRESENTED

CONTROL OF OFFICE DEVELOPMENT

Mr. Secretary Shore, supported by Mr. Secretary Rees, Mr. Secretary Varley, Mr. Secretary John Morris, Mr. Secretary Dell, Mr. Robert Sheldon and Mr. Guy Barnett, presented a Bill to extend the duration of and otherwise amend certain enactments relating to the control of office development in England and Wales: And the same was read the First time; and ordered to be read a Second time to-morrow and to be printed. [Bill 117].

MERCHANT SHIPPING (SAFETY CONVENTION) BILL [Lords]

Ordered,
That the Merchant Shipping (Safety Convention) Bill [Lords] be referred to a Second Reading Committee.—[Mr. Stoddart.]

Orders of the Day — FINANCE BILL

(Clauses 14, 15 and 21; new clauses relating to value added tax, subcontractors in the construction industry, benefits from employment (motor cars), and capital gains tax)

Considered in Committee.

[Mr. OSCAR MURTON in the Chair]

4.11 p.m.

The Chairman: Before I call the first amendment, I have two announcements to make. The first is that I regret that an amendment to Clause 15 in the name of the Leader of the Liberal Party, the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), and his right hon. and hon. Friends was left off today's marshalled list of amendments. The amendment, No. 24A, has now been made available in typescript form in the Vote Office, and I have decided that it should be grouped for debate with Amendment No. 15.
Secondly, I have received two manuscript amendments, one to Government Amendment No. 1 and one to Government Amendment No. 10, in the names of the right hon. and learned Member for Surrey, East (Sir G. Howe) and some of his hon. Friends. I have decided to select these two amendments, and a typescript of them is also being made available. The first group of amendments will accordingly consist of Government Amendment No. 1, with the manuscript amendment; Amendments Nos. 2, 3 and 4; Government Amendment No. 10, with the manuscript amendment; and Amendment No. 11.

Mr. Douglas Crawford: On a point of order, Mr. Murton. My right hon. and hon. Friends and I tabled an amendment on 2nd May, which is on page 2289 of the Notice Paper, in identical terms to Amendment No. 3 in the name of the right hon. and learned Member for Surrey, East (Sir G. Howe).

The Chairman: That is correct. The names of the hon. Member for Perth and East Perthshire (Mr. Crawford) and his

right hon. and hon. Friends were added to that amendment.

Mr. Ian Gow: On a point of order, Mr. Murton. It will be within your knowledge that Hansard for last Friday is not available. Since we are to debate the Finance Bill on Tuesday and Thursday, can you tell us whether the Official Report for today will be available? It is essential that we should have it on Tuesday and Thursday if we are to continue a meaningful debate on the Bill.

The Chairman: I regret to inform the hon. Gentleman that that is not a matter for the Chair.

Sir Geoffrey Howe: Further to that point of order, Mr. Murton. I wish to stress the importance of the point made by my hon. Friend the Member for Eastbourne (Mr. Gow). I am glad to see that the Leader of the House is present. He will appreciate that in a Committee stage of this kind it is most important, particularly with debates that go into the following day, that we should have access to properly printed Hansard reports of proceedings. If Hansard is not available, will the Leader of the House give any assurance about the availability of typed versions? Is there any possibility of using the emergency printing presses that languish in the Basement and might be put to good use for this purpose? It is of great importance that we should have access to reports of this kind.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): I fully appreciate the great inconvenience caused to the House by hold-ups in the provision of documents. We shall do everything possible to overcome it, but I cannot give any exact undertaking about what will happen. We shall do our best to meet the problem. I fully appreciate the importance of the matter.

Clause 4

HYDROCARBON OIL ETC.

The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move Amendment No. 1, in page 5, line 1, leave out subsection (1) and insert—
'(1) The rate of the duty of excise charged by section 11 of the Finance (No. 2) Act 1975


(hydrocarbon oil etc.) shall differ according to whether the oil is light oil or heavy oil; and accordingly—

(a) in that section after the words "£0·3000 a gallon" there shall be inserted the words "in the case of light oil and £0·3500 a gallon in the case of heavy oil";
(b) in the following provisions (under which duty is charged by reference to the duty on hydrocarbon oil), that is to say—

(i) section 6 of the Hydrocarbon Oil (Customs &amp; Excise) Act 1971 (petrol substitutes and power methylated spirits);
(ii) section 3(3) and (4)(c) of the Finance Act 1971 and Article 3 of the Excise Duties (Gas as Road Fuel) Order 1972.

for the words "hydrocarbon oil" there shall be substituted the words "light oil"; and
(c) in section 92(2) of the Finance Act 1965 (grants towards duty on bus fuel) for the words "hydrocarbon oil" there shall be substituted the words "heavy oil".'.

The Chairman: With this we are taking the following:
The manuscript amendment to Government Amendment No. 1, leave out from first 'shall' to the end and insert:
'be at the rate of £0·3000 a gallon'.
Amendment No. 2s, in page 5, line 1, leave out subsection (1) and insert:
'(1) At the end of section 9(1) of the Finance Act 1976 (Increase of duty on hydrycarbon oil, etc.), there shall be added the words "except for the period from 29th March 1977 to 31st May 1977, when the duty charged shall be £0·3500 a gallon.".'
Amendment No. 3, in page 5, line 1, leave out subsection (1).
Amendment No. 4, in page 5, line 3, after shall ', insert:
'as respects the period beginning at 6 o'clock in the evening of 29th March 1977 and ending at 6 o'clock in the evening of 5th August 1977'.
Government Amendment No. 10, in page 5, line 31, at end add:
'but as respects the period beginning at that time and ending at 6 o'clock in the evening of 5th August 1977 the rate of the duty of excise charged by section 11 of the said Act of 1975 shall, notwithstanding subsection (1) above, be £0·3500 a gallon in the case of light oil as well as heavy oil and the provisions mentioned in paragraph (b) of that subsection shall have effect accordingly'.
Manuscript amendment to Government Amendment No. 10, leave out '5th August' and insert '31st May'.
Amendment No. 11, in page 5, line 31, at end add:
'and shall cease to have effect at midnight on the last day of May 1977'.

Sir Geoffrey Howe: May I thank you, Mr. Murton, for your consideration in accepting the manuscript amendments, the first of which is intended to extend the range of Government Amendment No. 1 to cover derv as well as petrol. The Government tabled that amendment on Thursday, by which time the Notice Paper was not being printed in the ordinary way. On Friday the House rose at 1.30 p.m., and most hon. Members on both sides of the House—but Conservative Members with more effect—were enagaged in the local elections of Thursday and Friday. This is literally the first opportunity we have had of tabling our amendment. It indicates the undesirability of the Government's proceeding to these rather belated changes of mind as a result of whatever transactions may or may not have taken place with their colleagues in the Liberal Party. international agreements prohibiting illicit payment

Mr. Barnett: The cost of Amendment No. 1 is £140 million in public sector borrowing requirement terms for 1977–78. It needs to be compared with the loss of revenue for 1977–78 if the Ways and Means Resolution had been lost, which would have been £365 million. The reason for the much lower cost is twofold. In the first instance, it reduces the 5p tax on petrol only and not on derv. Secondly, it deals with the timing. It inserts in Amendment No. 10 the date of 5th August from which this reduction will take place.
The timing of 5th August has two advantages. First, it avoids very serious administrative problems that would otherwise apply. The manuscript amendment to Amendment No. 10, in the name of the right hon. and learned Member for Surrey, East (Sir G. Howe), seeks to insert the date of 31st May. The problem here is that on the best advice I am told that the Ways and Means Resolution that has been carried by the House would be paramount even if the date of 31st May were inserted. The amendment of the right hon. and learned Gentleman would not take effect until the date of the Royal Assent, whenever that might be. Until Royal Assent, we would be legally obliged to go on collecting the tax under the Ways and Means Resolution. There would then be the consequent chaos to which we referred in the debates on the Budget.
There would be great difficulty, to put it no higher, in repaying to the motorist—as opposed to the supplier—the actual reduction in the tax. That is one reason why we have not inserted a date earlier than the Royal Assent. We do not know the precise date of the Royal Assent. In view of the uncertainty that would follow if the date was unknown, we felt it would be much better to name a specific date, the last day on which Royal Assent is possible, namely, 5th August. That avoids the administrative problems and uncertainties. I believe that the Committee will prefer this approach to the difficulties that would occur if we accepted the right hon. and learned Gentleman's amendment.
The second advantage is the cost. The cost of the manuscript amendment, which would alter the date to 31st May, would be to add another £30 million to the public sector borrowing requirement for 1977–78, whereas the Government amendment, together with Amendment No. 10, would minimise the effect on revenue. Therefore, I hope that it will be more acceptable to the Committee.
I am aware of some of the problems that have been referred to in the Press in the past few days, including the administrative difficulties of 5th August. We could not put "Royal Assent" rather than a specific date, for the reasons I have given, but if the Committee agrees to the amendment I propose to consult trade organisations. If a more appropriate date within a few days of 5th August could be found which was more convenient to all concerned and would create fewer difficulties, I think that on Report it might be possible to insert that date.
I wish to make clear that I, my right hon. Friend the Chancellor of the Exchequer and the Government as a whole would prefer to keep the whole clause. I make no bones about that. But it is, I suppose, a strange situation. One has to recognise, with the democratic situation that now exists in this place, that there is not a majority in the Committee, as I understand it, for the clause as it stands.
We may have to get used to this situation in future. Even when, after the next General Election, the Government are returned with a majority, we may well find that Back Benchers are not quite so

amenable as they have been in the past to accepting everything that the Government suggest. It is perhaps worth noting the difficulties which Governments may get into from time to time in not being able to carry the whole Committee on a particular clause of a Finance Bill. That is just possible. So I make it clear that, whilst I am unhappy to have to ask the Committee to accept the amendment, I recognise the inevitability of there being no majority for the clause as it stands. This amendment, however, will limit the cost in the best way that we can conceive.

Dr. Oonagh McDonald: Does not my right hon. Friend agree that Labour Back Benchers made considerable objection to the proposed increase on petrol, and that some indicated their intention to vote against this clause?

Mr. Barnett: I had it in mind to come to that point. I am aware of my hon. Friend's views, which are shared by many others of my hon. Friends. But, speaking for myself, quite apart from the other arguments, to which I shall come. If I had £140 million to spend this would not be my priority about the way to spend it. Nevertheless, as I say, I accept that that is not the view of the majority of the Committee. We have, as my hon. Friend has said, received very strong representations from some of my hon. Friends, from people outside the Committee, from right hon. and hon. Members in the Liberal Party, from trade union leaders and many others on this point. We were bound to take note of them—hence this amendment.
I recognise the understandable concern, expressed in the Budget debate and on Second Reading, about those in rural areas and in heavily built-up urban areas who are running motor cars that they can barely afford to run. There are very serious problems, particularly in rural areas, where there is no other way of getting to work because there is no public transport service.
But again I do not think that dealing with those problems by reducing the petrol tax is the best way to help. Surely the way to help lower income groups, whether in rural or urban areas, is to have a decent public transport service, or to do it through social security benefits,


or to see a real increase in net take-home pay.
In considering the major problems of transport in the rural areas, one should look at what has happened in what are called the shire counties. My right hon. Friend the Secretary of State for Transport told the House last week that he increased the allocation of transport supplementary grant to shire counties in order to enable them to spend more on public service transport, but then found that the Tory-controlled shire councils did not spend the money on it. So when I hear the Conservatives complaining to us about rural transport problems, I find it a little difficult to take.

Mr. George Younger: Is not the right hon. Gentleman forgetting that the remainder of the money for such support would have to come from the budgets of the councils themselves, which are being pressed by the Government not to spend more—indeed, to cut their budgets? Is he not being ambivalent?

Mr. Barnett: I am not. The hon. Gentleman should read last week's debate. My right hon. Friend the Secretary of State for Transport told the House then that he made an allocation of the transport supplementary grant on the basis of proposals put by the shire counties. There are not now many Labour-controlled shire counties, and there were not even before last Thursday. These shire councils, having received grant on the basis of their own proposals, have in some cases changed them. So, as I have said, when I hear the Conservatives talking to us about the problems of rural transport, and that sort of thing happens in the shire counties, I find their complaints a little difficult to take.
I still believe that the arguments for an increase in the petrol tax are sound. I shall not go into detail of the main reasons, because we have been through them before. But there is, first, the conservation argument. It is true that the actual impact would be marginal, but, on the other hand, to go the opposite way is to reverse the situation. A decline in petrol tax must surely be the wrong way of dealing with the problem of petrol conservation.
Secondly, there is the question of the switch to indirect taxes in order to enable

us to reduce direct tax. The proposed increase in petrol tax was not even a real increase in indirect taxation. Thirdly, there are the alternatives. The right hon. and learned Member for Surrey, East and his hon. Friends are constantly telling us about the alternative of value added tax. But the VAT alternative, and, indeed, any other, has a worse effect on the retail price index and a worse effect on employment.
Fourthly, the tax increase would mean a "relatively small increase" in petrol prices. That is not my choice of words. I am not sure that I would have chosen them precisely. They were used by the hon. Member for Guildford (Mr. Howell) on Second Reading. But it is a small effect.
In my view, no real case has been made against the Government's proposal to increase the petrol tax. Nevertheless, as I have said, we recognise that, while we have the best of the argument and the best case, there is a majority against us in the Committee. But the problem will not go away. We shall have to come back to the problem of the petrol tax, as otherwise it would be the one indirect tax to decline, and I cannot believe that that is what the Opposition really want.

Mr. T. H. H. Skeet: The idea of indexing taxation is extraordinary coming from a Government who cause inflation. Why, therefore, does not the right hon. Gentleman propose indexed allowances also for the benefit of the taxpayer?

Mr. Barnett: I am not sure whether the hon. Gentleman is arguing in favour of keeping the 5p petrol tax in line with inflation from last year.

Mr. Skeet: No.

Mr. Barnett: He is not? I am still not sure of his argument. We are increasing personal tax allowances, although not as much as we would have liked. The right hon. and learned Member for Surrey, East has never argued in favour of indexation. Nor have I. But he is in favour of a switch to indirect taxation. Surely it is consistent with that thinking to maintain the petrol tax in line with inflation as from April 1976. If we do not, it will go into decline as a proportion of total taxation.

Mr. Nigel Lawson: That is indexing.

Mr. Barnett: The hon. Member for Blaby (Mr. Lawson) is remarkable. He suggests that a change from one year to another in line with inflation is indexing. I know that he has tried very hard to persuade his Front Bench of the virtues of indexing. He has tried since he joined the Opposition Front Bench, just as he tried before he joined it. I know that the fact that he is sitting behind the right hon. and learned Member for Surrey, East means that he has only to whisper in his ear. The right hon. and learned Gentleman is not as well up on this matter as the hon. Gentleman is, so the hon. Gentleman has to do so. An increase in indirect taxation from one year to another because of inflation is not indexation.

Mr. Lawson: Rubbish.

Mr. Barnett: I know that the hon. Gentleman wants to commit his Front Bench to the indexation of personal tax allowances and indirect taxes, presumably on a proper and full basis. He has not been able to convince his own Front Bench, and I am bound to tell him that he has not been able to convince me. Indeed, he has not been able to convince the House, and he will not be surprised to learn that I do not propose to suggest at this stage that we should move towards a form of indexation.

4.30 p.m.

Mr. Lawson: The right hon. Gentleman is a little confused. I have always made it clear that, as in every other country that uses some form of indexation, it does not preclude discretionary changes in taxation, open and above board, by the Government of the day whenever those are necessary for economic or other reasons. Therefore, there is no difference between indexation and what the right hon. Gentleman is saying is required with the petrol tax. Nor, per contra, is there any contradiction in our saying that there should be a discretionary change, in as much as petrol duty should come down.

Mr. Barnett: The hon. Gentleman should be careful when he uses the phrase "our saying". I know that he is a member of the Opposition Front Bench, but he is not on the Front Bench at the moment. He knows that his Front Bench is not in favour of indexation. I do not know whether the hon. Gentleman has

already resigned from his Front Bench, but his right hon. and hon. Friends are not in favour of indexation.
On Second Reading, the hon. Member for Guildford used a strange argument for the alternative that is being proposed by the Opposition. In fact, it was not an argument but was, rather, more of an assertion. He did not appreciate the case. He was arguing that the standardisation of VAT at 10 per cent. was better than selective taxes. Why is it better? On reading his speech again, the only argument that I can find that he advanced in favour of that assertion was that it was proposed decisively by the Shadow Chancellor of the Exchequer. Clearly, anything proposed by the right hon. and learned Member for Surrey, East is important, but to say that it is an argument for the alternative is, to put it mildly, overstating the case a little.
I do not know whether what the hon. Member for Guildford was putting forward was a new Conservative philosophy. I hope that Plato and Pythagoras will forgive me for using the words "Conservative" and "philosophy" together. I do not know whether the Opposition are saying that they would never increase selective indirect taxes. Is that what the hon. Member for Guildford is really saying? Is he saying that when some Government have standardised the rate of VAT at 10 per cent. he will never increase selective indirect taxes?
It appears that the hon. Member for Guildford does not intend to answer my question. It was a strange argument to advance that selective indirect taxes must decline whilst VAT must go up as a proportion. It is an odd argument that we are hearing from the Conservative Front Bench, and perhaps at some time someone will explain it. If the argument is not explained, we are bound to come to a certain conclusion.
If the Conservatives are in favour of increasing indirect taxes generally, including selective ones, but are not in favour of increasing them this year, perhaps they will tell us the year in which they would be in favour of increasing them. Is it not a fact that they are not in favour of increasing those taxes this year because this year they can be their thoroughly typical irresponsible selves? Is not that what it is about?

Mr. Victor Goodhew (St. Albans): Mr. Victor Goodhew (St. Albans) rose—

Mr. Barnett: I would rather that the right hon. and learned Member for Surrey, East told me what his case is, and I shall listen to it.

Mr. Goodhew: Mr. Goodhew rose—

Mr. Barnett: No. I am sure that the right hon. and learned Member for Surrey, East is most grateful for his hon. Friend's help—

Mr. Goodhew: Not at all.

Mr. Barnett: —but I see that the hon. Member for Guildford proposes to put the case. I hope that the hon. Member for St. Albans (Mr. Goodhew) will not mind if I give way to his hon. Friend.

Mr. David Howell: The Chief Secretary is dragging himself to the wrong conclusions and to a total distortion of our position. Our case for increasing VAT to 10 per cent. is, as the Chancellor of the Exchequer has explained again and again, that it happens not to fall on food or transport, and therefore is less regressive than other taxes. Secondly, we resent the disreputable choice of the Chancellor of the Exchequer in earlier years to reduce VAT to 8 per cent. for electoral reasons. VAT at 10 per cent. is the right level, and that is what we are arguing as we are entitled to do.

Mr. Barnett: Of course the hon. Gentleman is entitled to argue that. He is entitled to be as irresponsible as he likes. I have no objection to that, but I hope he will agree that I am entitled to expose his irresponsibility. I am sure the Committee will have noted that there was no answer to the question that I posed. Is the hon. Gentleman in favour, for all time, of not increasing selective indirect taxes? Does he want to see petrol tax decline as a proportion of total taxation? I see one of his hon. Friends shaking his head, but the hon. Gentleman is not shaking his head in any way. He is sitting there mute and not letting us have his views.

Mr. Goodhew: Mr. Goodhew rose—

Mr. Barnett: The hon. Member for St. Albans cannot speak for his Front Bench. Nor can his hon. Friend the Member for Blaby do so.

Mr. Goodhew: May I ask a question?

Mr. Barnett: I am afraid not; perhaps at some other time. I know that I am being unusually discourteous, but I hope that the hon. Gentleman will forgive me. I have been trying, without success, to ascertain the official Opposition's view. I do not know whether the hon. Gentleman can tell us what it is, given that the Opposition Front Bench does not know.

Mr. Goodhew: It is the Government's view that I wish to know.

Mr. Barnett: I am putting the Government's view. And not only the Government's view, but my view, too. They happen to coincide.
I think that the important thing with the amendment is to ensure that the reduction in the petrol tax goes to the motorist, and not to the petrol suppliers. I am aware of and share the view expressed both inside and outside the House that petrol suppliers might take an extra margin and therefore not give the motorist the benefit of this reduction.
I hope that petrol suppliers will take note of the will of the House. However, I am not prepared to rely on that happening, and petrol suppliers will be bound by the price controls to pass on the tax cuts in the form of reduced prices, although if the Opposition had their way we should not have that power either. I expect petrol suppliers to take all necessary steps to see that motorists benefit directly from this reduction in the petrol tax. If they do not, my right hon. Friends who deal with these matters will be ready to take action.
I now turn briefly to the question of offsets, which might be of some interest to the Committee. As the Stock Exchange is closed, I can refer to this matter. If the amendment is accepted, there will be no loss of revenue until 5th August, so we shall have time in which to consider what offset there should be. The need is, therefore, less urgent than it might otherwise be.
The decision on the nature and extent of the recoupment and, indeed, whether there should be any, can be considered between now and 5th August and a decision taken in the light of other developments affecting the Chancellor's room for manoeuvre. We should be bound to be influenced by any other changes that occur


during the passage of the Bill, but in the light of the amendment, which meets the main concern about the increase in petrol prices, I hope that the Committee will accept Amendment No. 1, and Amendment No. 10 that goes with it, and reject the other amendments to the subsection and, indeed, to the clause.

Sir Geoffrey Howe: Can the right hon. Gentleman help the Committee on the interpretation of the clause as amended? When one looks at the effect of a clause, one sees that the amendment is drawing a distinction between light oil and heavy oil, which for this purpose is petrol and derv used as a motor fuel. Subsection (1) is concerned with motor fuel, and subsections (2) and (4) deal with heavy oil and light oil respectively for home use. Can the right hon. Gentleman enlighten the Committee as to which of those subsections deal with what, in the light of the amendments to subsections (2) and (4)? This is not an inconvenient time to do that, because we shall be looking at all these subsections together.

Mr. Barnett: We are dealing with subsection (1), as the right hon. and learned Gentleman knows. My amendment would leave the increase in tax on derv and would reduce the tax on petrol. We shall deal with the other amendments when we reach the other subsections.
I recommend the amendment to the Committee, although I should have preferred not to move it. This amendment will keep the cost down to £140 million rather than the very much larger sum that would have been the cost if the Ways and Means Resolution which was carried at the end of our Budget debates had been lost.

Sir Geoffrey Howe: I am not sure, Mr. Murton, whether I ought now formally to move my amendment to the Government amendment.

The Chairman: The right hon. and learned Gentleman can move it now or at the end of the debate.

Sir G. Howe: We have seen the Chief Secretary—by his own admission—in unusually discourteous form and, I would add, in unusually discursive form in, as he described it, presenting the Government's view of the matter. What strikes us is that there is some confusion about

precisely what the Government's true view is. On Second Reading the Chief Secretary vigorously defended the tax provisions contained in the Bill as originally drafted. He then commended them to the House of Commons with enthusiasm.
This afternoon the Chief Secretary spoke with two quite distinct voices. At the end of his speech he commended the amendment to the Committee having spent most of his speech on the clause unamended. So we take some pleasure in seeing the Chief Secretary move a wrecking amendment to his own Finance Bill.
We welcome the withdrawal of the duty increase in petrol as far as it goes. We find the chaotic manner of its introduction somewhat unimpressive but characteristic of the state the Government have now reached. The amendment appeared on the Amendment Paper at a belated hour on Thursday night after Lord knows what tribulations, disputations and consultations with those who claim credit for it and who sit on the Liberal Bench. We shall examine later just where the credit for this change of mind lies.
We are not impressed by the technical argument advanced by the Chief Secretary. I should like the right hon. Gentleman's help on this matter later. He said that it would not be possible to effect this reduction on 31st May. We deliberately selected and put into our amendments the date 31st May to allow the Government time, in this helter-skelter process in which they are engaged, to introduce another Budget Resolution to legitimatise the reduction with effect from 31st May. My hon. Friends and I see no reason why this should not be done. Will the right hon. Gentleman say whether there is any substantial procedural reason why this should not be done? My hon. Friends and I have read the Act. I have no doubt that the Chief Secretary has, too. We believe that it would be possible to make this reduction take effect from 31st May. The right hon. Gentleman has not yet met our argument.
Coming to the merits of the tax, the Chief Secretary asked us to explain our objection to this tax and our preference for a broader spread of increases in indirect taxes. I should have thought that it was by now becoming common ground in the House of Commons that there was


a case for shifting the burden from direct taxation to indirect taxation. Indeed, the Chancellor commended that case in his Budget. He has embarked on reductions in direct taxation and, presumably, is making this increase in indirect taxes as a means of bridging the gap.
However, what the Chancellor has chosen to do is to introduce this particular clutch of taxes on petrol, oil and all the associated products. Our complaint is that this is a selective increase in a selective expenditure tax.
If a Government are to begin shifting the burden in this way, there is a great deal more sense in introducing an increase in the flat rate of value added tax, which is spread over a wide range of products—as my hon. Friend the Member for Guildford (Mr. Howell) explained—which is less regressive, which does not apply to food, transport, housing or fuel, and which does not have the particular effects to which this proposal has given rise.
4.45 p.m.
This is a selective tax. As has been pointed out by the Chief Secretary's hon. Friends and others, it is deliberately biased against those who have no option about the method by which they travel to work. It is deliberately biased against those living in rural areas. It is deliberately designed to have precisely the wrong effect on the reverse yield gap between going to work and staying at home, which is the very point about which the Chancellor of the Exchequer has been expressing himself so eloquently for so long.

The Chancellor of the Exchequer (Mr. Denis Healey): Will the right hon. and learned Gentleman now take the opportunity of answering the question put to him by my right hon. Friend the Chief Secretary? The value added tax in real terms rises automatically each year because it is a percentage paid on the value of the goods sold. If we were to take the right hon. and learned Gentleman's advice, we should be increasing still further the tax on half the goods consumed but allowing the tax on tobacco, drink and petrol to fall year by year. Is this really the right hon. and learned Gentleman's policy? If not, how does he justify the line of argument on which he has now embarked?

Sir G. Howe: In this Budget the Chancellor is not touching the tax on drink in any event.

Mr. Healey: I did that in December.

Sir G. Howe: The advice that we have given the Chancellor throughout his misguided course on this matter is that he should never have moved away from the 10 per cent. rate of VAT. We have always condemned that move on the grounds that it was made for squalid—

Mr. Healey: Mr. Healey rose—

Sir G. Howe: No, let me finish. The move away from a flat rate of 10 per cent. was made for squalid electoral reasons in the summer of 1974. The Chancellor should never have gone on to two rates-8 per cent. and 12½ per cent.—which have cast the retail trade into continuing confusion. If he had remained with the figure of 10 per cent. VAT, he would be raising £700 million more today, far more than is being raised by these impositions.
Our complaint is that this is a particularly ill-designed, ill-judged measure to introduce at this time instead of it being done in the context of a general shift of burden. If the Chancellor thinks that this is an eccentric view, he might reflect on the unique position that he has contrived to occupy as a result of the Budget. The opinion poll which was held the week after the Budget was introduced showed that the Chancellor, compared with every other Chancellor in Britain since 1952, has achieved a unique double. This is the only time in history over those 25 years that a Chancellor has got more people saying that he is doing a bad job than that he is doing a good job. That is the first aspect of the right hon. Gentleman's achievement.
The second feature is that the Chancellor has got the largest number of people ever recorded in the history of polls believing both that he is doing a bad job and that the Budget is not fair. That is a sufficient condemnation of the ineptitude of the Chancellor in making this imposition.
In addition, this is an ill-judged move to make at this time. It is extraordinary conduct to impose an additional tax on petrol and oil products at the very time


that one is arguing with the OPEC countries against the wisdom of their raising the price of those products.

Mr. Healey: Do I take it that the right hon. and learned Gentleman is totally opposed to President Carter's proposals to reduce America's oil consumption by raising the tax on petroleum used in motor cars?

Sir G. Howe: It is hard enough for the Chancellor to cope with Britain's economic problems without dealing with those of the United States. Let him take note of this fact. If I am invited to comment on President Carter's approach, I will make two points. First, the United States has a far lower price for petrol and oil products than this country. Secondly, this country has comparatively few advantages in the world in terms of natural resources. As the Chancellor never tires of telling us, we shall shortly be self-sufficient in oil and petroleum. We should be glad to derive some advantage compared with the United States. All that I am suggesting to the Chancellor is that we have to put our own house in order and decide our own energy policy in the light of our own pricing mechanism and our own resources.

Mr. Joel Barnett: Mr. Joel Barnett rose—

Sir G. Howe: I shall not give way. It becomes clear that the Chancellor has got himself into a most curious position when one studies the way that he is now getting out of this particular mess. Having introduced a selective tax instead of a more broadly-based increase in expenditure taxes, he is now making a retreat that is not designed to fulfil any strategic, economic or energetic political purpose except meeting the parliamentary arithmetic. He is ending up with an even more selective imposition of tax by retaining the higher rate of duty on derv, central heating fuel, industrial heating fuel and other lubricants. It seems extraordinary that the great crusade of principle upon which the Government had embarked—we remember the Chancellor saying in his Budget speech that his measures were all directed to important matters of principle and all justified on their own merits and of importance to the strategy of this Government—has crumbled before our eyes. We are left with the hapless industries using derv, the road

haulage industry and road passenger transport industry—with certain exceptions—having to face alone the impost of an additional £90 million taxation when only last year an extra £170 million in taxation was imposed upon them. The rationale for this selective impost has totally disappeared.
The Chief Secretary looks quizzical about this because a week or two ago he told us how important it was to have this burden, but he now says that it is important that it should be cast in a different way. To land that burden now on those people who need industrial resources and central heating, on certain buses and on the road haulage industry is to introduce an absurd element of injustice. This is the second year that these people have had to face such an imposition, and it makes no sense.
The deal that is now presented to the House is being hailed by some outside commentators as the first fruit of the Lib-Lab pact.

Mr. David Steel: There have been two other fruits.

Sir G. Howe: Then let the first two fruits of that squalid alliance continue to blush unseen. However, let us examine that contention. This is not the result of the Lib-Lab pact. The Government would have preferred to keep the clause intact. The Chief Secretary said that it was worth the House taking note of the difficulties that face the Government. The Government would find it difficult to conceal them. This conclusion has been forced upon the Government—as the hon. Member for Thurrock (Dr. McDonald) said a moment ago—as much by the disintegration of the Callaghan-Tribune Group pact as by anything else. It is an outcome of the parliamentary arithmetic that has been forced upon the Government by the changes in Parliament that the British people have effected in successive by-elections. If the Government still had their previous majority they would not have been seeking the support or advice of the Liberals, nor would Liberal advice have mattered one jot to the Government were it not for the fact that the Conservative Opposition, from the outset, had opposed this tax as misguided. It is the result not of the


Lib-Lab pact but of the continuing alliance between the parties in opposition to a Government who have lost their majority in the House. This Government ought not to be introducing Budgets at all.
The changes that the Government are now being driven into making are giving rise to particular practical difficulties. The Chief Secretary tried to deal with one point. He was rightly anxious to see that the reduction of tax would be passed on to motorists through a reduction in petrol pump prices. However, there have been reports in the Press that the Motor Agents' Association is asking what will happen, if the reduction is delayed until 5th August, to those garages that have large amounts of duty-paid petrol in stock. I realise that if that argument were taken to the extreme one could be said to be against reducing taxes at all, and far be it from me to press for that.
The Chancellor is an expert at reversing most things, but this is the first time that he has reversed his Budget in mid-flight. The House is entitled to an explanation how it will be dealt with. There are fears that some garages may run out of stock as a result of the proposed reduction.
I do not wish to delay the House for long. I am glad that the Government have been compelled by the arithmetic of the House to abandon at least part of the misguided provisions of their Budget. I am profoundly discontented that the change has been made in such a selective way and that other parts of industry will be paying a higher rate of tax, because that will put those parts of industry at a disadvantage. This is the inevitable consequence of a Government trying to stagger on and to introduce legislation when they have outlived their time, their mandate and their usefulness.

Mr. John Pardoe: I did not get the impression that the Opposition spokesman sounded terribly pleased. I am not sure why not, because, after all, the right hon. and learned Gentleman's constituents will benefit from this reduction as much as mine will. I should have thought that he might sound more glad that, in this instance, parliamentary arithmetic—as he calls it—has done something for his constituents and for mine.
I must point out that in a parliamentary democracy there is not much wrong with parliamentary arithmetic. Parliamentary arithmetic has to control executives. It is most unfortunate that some executives have pushed through the House, by dint of entirely faulty parliamentary arithmetic, a load of nonsense such as the right hon. and learned Gentleman would not now dream of reintroducing. An example would be the right hon. and learned Gentleman's Industrial Relations Act. If he does not believe that it was nonsense, surely he will promise to reintroduce it. Faulty parliamentary arithmetic allowed him to push that legislation through the House. It is a pity that there were not then enough minority parties in the House to stop his game.

Sir Geoffrey Howe: The Liberal Party voted for the Second Reading of that Act.

Mr. Pardoe: No doubt the right hon. and learned Gentleman will remember the reservations that we made and that we stated on Second Reading that, although we were prepared to vote for the Bill, we would oppose it unless substantial changes were made. That is exactly the thing that he is now criticising the other way round in our action on petrol tax. We stated that we would support it as part of the Budget legislation but that we would oppose it later. That is exactly what we have done.
Anyway, the parliamentary arithmetic may not have been all that the right hon. and learned Gentleman believes, because the votes last week on rural transport indicated that the Irish are not particularly good at attending the House at the moment, so there may not have been a majority to support our view on petrol tax. It was therefore necessary to indulge in considerable argument in order to obtain this concession. I do not regard it as a victory. If it is a victory for anything, it is a victory for common sense and that is all.
What the Chief Secretary has said about the problems that confront the House when there is parliamentary arithmetic of this kind may well be a lesson for the future about introducing taxes that start at 6 p.m. on Budget Day. Governments should learn that in such parliamentary situations—and I hope that in future the Chancellor will not believe that a


lot of damn-fool Back Benchers will back anything that their Government introduce—it may be better for Parliament to vote before the tax is effective. I do not believe that that would cause a run on the Stock Exchange or any other such problem.
5.0 p.m. 
We were castigated when we abstained on the Budget Resolution because we thought that it would cause administrative chaos to repay the tax. I was interested to see the Conservatives come into line with that argument. Having tabled an amendment that would cause exactly that chaos, namely, that we should go back to the situation that would have obtained if the vote against the Budget Resolution had been carried, the Opposition noticed our amendment, agreed that, as usual, we had taken superior advice and decided to follow in our footsteps. I am glad that they were converted to that view.
The Chief Secretary was wrong to argue that he had not changed his mind and I regret that he has not changed his mind on the principles. On all counts, there are strong arguments against an increase in petrol tax.
The argument for increasing the tax was that it was a revenue raiser. Originally, the increase would have raised £300 million—£225 million from petrol and £75 million from derv. Now that we are talking in terms of 5th August, there has been a reduction from £225 million to £140 million on the petrol alone.
Of course revenue is important, but as with any other tax, Parliament is entitled to ask whether this is the best way of raising revenue. The second important question on any tax is whether it is fair between one citizen and another, and the final question concerns its likely economic effects.
The Chief Secretary used the argument about revalorisation. I accept that argument. Indeed, I advocate the total indexation of the tax system. We cannot isolate one tax from the rest and if we are to index the tax system we must index the whole system and automatically revalorise all expenditure duties. The best way to do that would be to have ad valorem taxes, but we shall be debating that in Committee upstairs.
The Chief Secretary also said that many people on all sides wanted a change from taxes on income to taxes on consumption. I agree, but it is still relevant to debate which consumption taxes and their effect on the economy as a whole.
There is a sort of a vague feeling, not so much in the House as outside, that road transport is wrong. It is difficult to pin down the people who take this view because some are anti-noise, some are anti-pollution, some are anti-roads. There is a land use argument among some of the agricultural lobby which may be more important in future, and some are railway romantics. I suppose that we are all railway romantics to an extent, but whenever I start to feel that way, I remember the passage in "Middlemarch" in which the yokels came out with pitchforks to drive off railway surveyors because they did not want abortions in their cows.
There will always be people with pitchforks to stop change. There is an element of that in most of us, but we have to accept the facts of life as they are, and that means accepting that people prefer road transport. It may be bad and sinful of them to do so, but 92 per cent. of all passenger mileage is by road and 90 per cent. of all inland freight tonnage is carried by road.
We may fret and fume, but for the great majority of people, road transport is preferable. It offers flexibility, convenience and an essential degree of liberty. Even if a switch to rail transport is accepted as desirable, there is no certainty that it can be accomplished because road transport has a remarkable inelasticity of demand.
The Government's case has been that by increasing the tax on petrol they would stop people consuming petrol and that might result in a small switch from the car to public transport. However, if we go back to 1973 and the start of the oil price increases, many people predicted then a permanent reduction in the use of the car and its popularity. Three and a half years later we see a different story. The problem in the British car industry is not how to sell the cars but how to make enough—despite amazing rises in the price of new cars and the cost of servicing and running them.
Whatever some people may think ought to be the case, the car is seen by


many people throughout the country as a necessity and not a luxury. They feel the need for a car. It is instructive to con-pare what was expected to happen in the hours of gloom in 1974 with what has happened to demand for petrol. It is a fair indication of the inelasticity of demand for road transport.
In 1974 the NEDO published a report called "The increased cost of
energy—Implications for UK Industry". After noting that between November 1973 and February 1974 the median price of petrol had increased by 43 per cent., the report said:
It would suggest a steep fall in consumption, with the resumption of the previously rising trend delayed for at least several months. It may not be resumed even then, since people's expenditure patterns will be influenced by the state of the economy as a whole and by their income expectations.
It went on to say:
A further effect will be a reduction in the rate of growth of car ownership.
It would be wrong to say that all its predictions had been confounded, but it is difficult to distinguish between the direct effect of the oil price increases since 1973 and the less direct effects of the recession. The economy has not been growing and one would not expect the consumption of petrol or the purchase of cars to grow very much. The extraordinary thing is that petrol consumption has increased.

Mr. Nicholas Ridley: Does the hon. Gentleman agree that the very high rise in the price of petrol in the past three years has been due not so much to the Arabs as to the Chancellor of the Exchequer who has asked for twice as much extra as have the Arabs?

Mr. Pardoe: That may or may not be the case. I accept that taxes on petrol have risen. I have many arguments to make, but one must be careful before arguing for a cheap energy policy. I do not think that the right hon. and learned Member for Surrey, East (Sir G. Howe) was arguing that and I am certainly not arguing in favour of a cheap energy policy as a long-term approach to our problems.
In 1973, motor spirit delivered to petrol retailers totalled 16,659,321 tons. The figure fell in 1974 and 1975, but in 1976 it was well above the 1973 level at 16,878,600 tons.

Mr. Ronald Atkins: The hon. Gentleman is pointing out that demand is increasing rapidly despite certain restrictions. In view of the diminishing reserves and the continuing increase in demand that he seems to be forecasting, does he not think that there is a strong case for conservation measures to be introduced?

Mr. Pardoe: I shall come to that in a moment. I am not saying that demand has risen rapidly. It is difficult to tell how far the small rise in demand that has occurred has been due to the recession, has been held back by the recession or has been held back by a substantial rise in the price of oil.
In a period of three years during which the price of petrol more than doubled, consumption increased—though not by a great deal. It may be said that it would have increased by much more if the price had not increased by so much. So might it have done if there had not been a recession.
A further indication of the inelasticity of demand for petrol comes with an examination of petrol as a share of total oil consumption. In 1973 motor spirit amounted to 15·9 per cent. of total United Kingdom oil consumption. In 1974 the figure was 16·5 per cent., in 1975 18·4 per cent., and in 1976 19·5 per cent.
If petrol is considered to be the luxury end of the market—and there are those who argue that car transport is in some way a luxury—it should not have increased its share of total oil consumption. Incidentally, that share of around one-fifth of the total oil consumption shows how futile it is to concentrate efforts to save energy simply on the motorist. A 1 per cent. cut in consumption of all non-motorist usages of oil would have the same effect as a 4 per cent. cut by the motorist. We might do more to achieve a total energy conservation by concentrating on the 80 per cent. instead of on the 20 per cent. figure.
It is hardly surprising that the Department of Energy is unable to quantify the saving in petrol consumption which it suggested would happen as a result of the petrol price increase. On 20th April in a Parliamentary Answer the Department gave the following view:
the Budget increase in road fuel duty is expected to reduce motor spirit consumption


by about 1 per cent. to 2 per cent. in 1977–78 below what it would otherwise have been, and by more in the longer term."—[Official Report, 20th April 1977; Vol. 930, c. 112.]
I very much doubt those figures, and on the basis of the figures I have quoted one sees that judging by past experience they do not stand up to examination. The figures of car sales are notoriously difficult to read, but who would have thought that the prophets of gloom in 1974—NEDO among them—would have believed that in 1977 the problem of car manufacture would be not unsold cars but long waiting lists for delivery enabling importers to take something like 45 per cent. of the total market this year?
My conclusion from all this is that petrol is not price-elastic. That might lead the Chief Secretary and the Chancellor to conclude that since the product is not elastic in demand price it might be an ideal base for a tax, but other factors have to be considered—fairness and overall economic effects among them.
Is a petrol tax fair between one citizen and another? Primarily it has an above average impact on the rural motorist. The Guardian newspaper seems to believe that people should not live in rural areas. It takes the view that they only choose to do so. I suppose it could be said that they choose to read The Guardian—or some of them do for their sins. Therefore, says The Guardian, they should pay a price for living in rural areas. Some people do choose to live in rural areas, but for millions of people there is little choice. Even if jobs were available in urban areas, houses would still have to be found in those areas, and certainly the cost of providing housing would be substantial. That might mean more second homes available for other people.

Mr. A. J. Beith: Readers of The Guardian.

Mr. Pardoe: They certainly seem to occupy most of the country cottages in my area. I gather The Guardian claims to be an environmentalist newspaper. Is it part of The Guardian's environmentalist case that people should desert the countryside and huddle together in urban communities? The social and environmental costs of such urgan crowding are infinitely greater than any saving that might be made on average.
Some Liberal Members, including myself, have been pilloried in certain sections of the Press and elsewhere for representing our constituents' views as though that was a matter of condemnation. It is true that many of us represent rural areas, but it is no bad thing that any such views should be expressed vehemently in this House. I give notice that if representing and fighting for the interests of my constituents is a sin, I propose to remain a sinner, and I shall enjoy it.
People living in rural areas are massively dependent on private road transport. In large parts of rural Britain there is simply no alternative. It is no coincidence that in the South-West region and East Anglia there is the highest car ownership per 1,000 households—namely 850, compared with the figure in the rest of England of 740. A figure of 68 per cent. of all journeys over one mile in the South-West region in 1972–73, according to the National Travel Survey, were carried out by car, although Britain's average amounted to 59 per cent. Spending on cars in the South-West and in East Anglia is by far the highest as a percentage of total household spending than elsewhere in the country. This is not happening because those areas are wealthy. Indeed, Cornwall has the lowest income per head of any county, but we have the highest car ownership because a car is a necessity and not an economic luxury.
5.15 p.m. 
This in part is an answer to the Government and to those who say that this will have an adverse effect on the retail price index—namely, if we were to raise the VAT to 10 per cent. I see that the Chancellor of the Exchequer disagrees with me, but the pattern of expenditure in the various regions varies widely. The retail price index depends on the weight given to the particular category of purchases in the average family. There are, substantial regional variations. In the South-West, expenditure on maintenance and running of motor vehicles in 1974–75 amounted to 8·1 per cent. compared with 6·4 per cent. in the United Kingdom generally. If we had been building up a retail price index for the far South-West, we would have found that an increase in the petrol tax would have a much greater than United Kingdom average effect and, I suspect, a greater effect than if we were


to increase VAT. However, that is a difficult calculation to make.
In 1975 deliveries of petrol per head of population were 0·378 tons in the South-West compared with 0·272 tons in the rest of the United Kingdom. Those figures illustrate the importance of petrol and the private motor car. Therefore, the effect of increasing the petrol tax in rural areas is greater than in urban areas.
The question of getting to work is the most important factor of all. This is what the Government must consider in their policies. I accept that getting to work, even by public transport, is very expensive in urban areas. It now costs 70p return from my house in North London to the House of Commons, and that is one reason why I do the journey on a moped rather than by London Transport. But the costs are higher generally in rural areas, and of course there is no alternative. On a rainy day in London I can leave my moped and travel by tube, but in rural Cornwall that is not possible.
One of my constituents who lives in Newquay travels to Truro every day by car because there is no other means of transport. His take-home pay is £37 a week. When one considers what he could obtain by living on supplementary benefit, this means that there is no incentive for him to go to work. Another constituent who works for a local authority came to see me this weekend and showed me his pay slip. He is taking home a wage of about £38 a week—which by standards in Cornwall generally is not low pay, and indeed the wages earned by both those constituents are fairly average. The Government may argue that the effect of the petrol price increase will not be great for the average motorist spread over the year. But it appears that the cards are stacked against the man who has to travel to work and that the higher costs will cause him more and more to stay at home.
The argument can also be put forward by the wives of such men, and it is difficult to counter. A wife can now say that she will get more from supplementary benefit and other allowances, including the payment for school meals to which she is entitled, which together amount to more than the husband is bringing home.

Mr. Brian Walden: I agree with the point the hon. Gentleman is making, and in a recent letter to my right hon. Friend the Chancellor of the Exchequer I made the same point relating to one of my constituents. Would it not be more logical to meet this problem if the Liberal Party were to press my right hon. Friend to remedy the worst injustices of our tax system by deducting these essential travelling expenses from income tax? Would that not be a much more rational approach?

Mr. Pardoe: I accept that point entirely. Indeed, I have raised it myself on previous Finance Bills and pressed it on Governments of both Labour and Conservative persuasion. The arguments are Treasury arguments, of course, and out they come to the effect that it would be administratively difficult, extremely complex and so on. But there is plenty of precedent in Europe—in Germany, for example—for allowances for getting to work.
I believe that a better way might perhaps be to look at the tax thresholds, at least to start with, and then in development areas possibly to replace the regional employment premium with a getting-to-work grant, which might be paid through the employer. I believe that that would enormously improve the ability of employers to create jobs in some parts of rural development areas.

Mr. Norman Atkinson: We are told that there are about 10½ million job changes per year. If the tax allowance for travel-to-work costs were based upon distance, there would thus be about 10½ million tax changes per year for this one item alone.

Mr. Pardoe: That is part of the problem of our tax system, with PAYE based on an annual tax. If we had moved over to a weekly tax base, which we should have had to do with the credit income tax—this was one of the problems which the Select Committee had to discuss—it would have been easier. But it is not an argument which I am putting now. The German system works on a standard allowance, and the effect in that case would be much the same as increasing the personal allowance. There is not much difference in that.
The Government do not yet understand the problem of alternatives in rural areas. The Chief Secretary today castigated what he called Tory-controlled councils for spending on other things the money which the Department of Transport had made available to them for subsidising rural bus services. I have to tell the right hon. Gentleman that I am no longer by any means convinced, though I used to be, that the answer to the rural transport problem is more bus subsidies.
I have come to the conclusion that more bus subsidies will simply mean more empty buses running around Cornwall. I do not believe that we should fill them—most of them are pretty well empty now—and the cost of subsidies in such areas is already huge. I have had some alarming figures put to me from the Cornwall area showing, for instance, that the total cost of bus subsidies in 1976–77 is estimated as running to about £2½ million. That is just for Cornwall alone, and it is large enough, in all conscience. Moreover, there is hardly a bus service in the county which works at a profit, and some of them work at extraordinary deficits.
One begins to ask oneself, therefore, whether it is really worth continuing to pay out these vast sums of money to keep empty buses running about. I realise that this is dangerous talk, because one will be accused of sabotaging rural bus services, but one has to task whether bus services are energy-efficient in the first place.
On 1st November in a Written Answer—this is col. 471 of Hansard—the Under-Secretary of State for Transport said that a car carrying one person used from 3 to 4·8 megajoules per passenger-kilometre, a minibus carrying 12 persons used 0·6 megajoules of energy per passenger-kilometre, and a bus carrying 70 persons used 0·15.
That looks bad for the car. But cars do not carry only one person, and not all 70-seater buses carry 70 people. According to the Department of Energy in its Energy Paper No. 10, the average load of a car on rural journeys is 1·7 passengers and of a rural bus it is only 15. Pursuing those calculations, one finds that megajoules per passenger-kilometre for the typical rural bus are 1·4 and for a typical car they are 2. That is still not very good for the car, but Cornwall's figures do not lead me to the conclusion that buses are

running about with 15 passengers in them. That is certainly not my experience in the West Country. My conclusion is that the energy used per passenger kilometre is not very different as between the rural bus and the car.
The advocates of more rural buses will say that we should increase the tax on petrol to force people on to the buses. How high would the tax have to go, and how high would bus subsidies have to be to persuade people to make the switch?
I have spent quite a lot of time trying to convince myself of the argument for more buses, and I admit that I have failed. I am now convinced that on every ground—energy conservation, price, public costs and service to the rural community—the answer lies in the other direction, in encouraging a higher load factor in cars. I believe that the answer to the rural transport problem in Britain lies in every car owner becoming his own passenger transport contractor, carrying people about for profit and gain—for hire or reward, as the Act now says.

Sir John Hall: I am sure that the hon. Gentleman will agree that there is an alternative to the ordinary rural bus, namely, that we should utilise Post Office vehicles.

Mr. Pardoe: I agree. It ls not just a question of using private cars. If one takes a typical village in Britain and plots out every journey going in and out of it, one finds an incredible number of journeys in and out, yet many people who live in the village will feel more cut off in terms of the services which they have, if they do not own or drive a car, than their grandmothers or great-grandmothers did many years ago.
It seems to me that that is the direction in which we should be seeking a solution, making use of the journeys which are now being made, whether by post bus or other form of public transport or by private car. Those are the services which we should be using. I draw a comparison with the hospital car service. We have enlisted the aid of the private car owner in order to provide an extensive range of service for hospitals.
In my view the law should be changed to allow that to happen. It is not just a question of allowing or forcing insurance companies to give cover. People must be allowed to advertise their service. I


envisage a state of affairs in which the local papers will have a series of advertisements saying, for example, "Two seats to Plymouth next Friday morning, leaving Newquay 10 a.m.". I believe that that might well solve the problem. Local community groups could do it, too.
I am indebted to Ian Heggie, the director of the transport studies unit at Oxford University, for some very interesting figures. Moreover, in his letter to me he adds that in terms of energy efficiency the private car can match the bus in rural areas.
I come now to the crux question about which the Government are concerned, that is, energy conservation. In comparison with other countries, Britain is not doing at all badly in this respect. Whether this is a consequence of our present economic growth and productivity one does not know, but annual consumtion per head of motor gasoline, in tons of oil equivalent, is about 0·31 in the United Kingdom, 1·43 in the United States and 0·34 in Germany. So Britain is not a nation of gas guzzlers. It is the Americans who are the gas guzzlers, and President Carter is absolutely right to try to do something about them. But that does not mean that we should hang our heads in shame and say, just because he is increasing the tax on petrol, that we must do the same. We already have a good record in this respect—perhaps not good enough—and I think that this puts our performance in context and nails the argument that the British people ought to pay more for their petrol because others pay higher prices. I do not believe that it should be so.
The balance of payments argument is important, of course, but we should remember that it works for other products, too. If a high price for energy is the solution to the oil deficit, surely it is also the solution to the food deficit. In 1975 United Kingdom petroleum and petroleum products imports amounted to £4,168 million, but imports of food and live animals amounted to £3,931 million—only marginally less.
5.30 p.m.
The Government accept that cheap food is good for Britain. How can they argue in the next breath that dear energy is

also good for Britain? If high prices for energy reduce our dependence on imported energy, would high prices for food not also reduce our dependence on imported food? It is a very difficult calculation to make, but the Government cannot quote an argument in support of their line on energy conservation without at the same time accepting it on the other question of food.
The Chief Secretary will no doubt, in replying to the debate, take note of the point raised by the right hon. and learned Member for Surrey, East about the motor agents. I hope that he will explain to the House how the Government see this question of the repayment to the motor agents. That is more or less what they are asking for if the agents are not to destock oil. I do not think that all the retailers in this country will run out of petrol on 5th August, because it happens to be at the height of their petrol sales, and they will not do themselves out of a penny or two.
But what happened when the price went up? Who got the benefit that time? Was it an enormous problem for the retailers of this country to deal with? It did not seem to be at the time. I suspect that they made a fairly handsome profit on the deal, and as a motorist my heart will not bleed too much if they make an equivalent loss the other way round this time.

Mr. Atkinson: I think that the last point made by the hon. Member for Cornwall, North (Mr. Pardoe) answers the original Conservative question about the relevance of the Tribune group as against the Liberals. It has always been a mystery over the years, whenever taxes have increased—and particularly on petroleum products—that one is offset against the other.
I take it, Mr. Murton, that you do not require me to move Amendment No. 9 at this stage. Is it your intention to take the amendments together, or what is the position?

The Chairman: Amendment No. 9 stands by itself.

Mr. Atkinson: I want first to comment on the parliamentary position as it has been posed to us by the right hon. and learned Member for Surrey, East (Sir G.


Howe). The debate has shown the inadequacy or the limitations of the parliamentary method. It is a very difficult position to overcome, speaking in terms of a true democratic practice, because in finance matters it is not possible, as I understand it, under the conventions, for the House of Commons to initiate any discussion which would lead to the imposition of additional taxes. The convention is that it is the Government who must do that. They initiate any move, and it is not within the competence of the House itself, either in Committee or in full House, to levy taxes upon the country.
The situation, therefore, is a curious one, in the sense that it is possible for the House of Commons to defeat the Executive and thus negative a tax stated in the Budget, but what the House of Commons cannot do is to replace that tax by something else. There is always a kind of oddball discussion going on, because the House of Commons by majority opinion may wish to eliminate a particular tax but it cannot go on to round off the argument by proposing something else. It has to wait always for the Executive to come down the mountainside to the House of Commons and let us into the secret of what they intend to do. The House then reacts to the situation always of necessity in a negative way. It cannot be positive about this.
That is the weakness of this sort of situation, whether it is a Steel-Thatcher pact or a Steel-Labour pact. Incidentally, a Steel-Thatcher pact is a particularly formidable weapon—I do not know whether anyone has ever seen it—particularly if it is a stainless Steel-Thatcher—

The Chairman: Order. The hon. Gentleman is posing some form of humorous aside. The names of right hon. and hon. Ladies or hon. Gentlemen who are Members of this House may not be used. Only their constituencies may be mentioned.

Mr. Atkinson: I am sorry if that expression offends, Mr. Murton. I should have thought it was a fair description of the tool to be used, if that is the right term. However, I will not pursue that, except perhaps to say that it is a large hook-shaped thing for drawing loose ends together.
My point is that in order to make sense of this sort of exercise—if we are to have it in the future—we must try to devise a means whereby the House itself or the Committee can propose to the Government that they ought to initiate certain tax discussions.
This raises a very pertinent question which is quite unique in this country, that is to have discussion across the Floor about a tax before it comes into effect. That is the point raised by the Liberal Party. This is what we ought to try to do. There is no reason why the House of Commons should not discuss taxation openly, just as the Government now do it in secret. There is no reason why those exchanges should not take place across the Floor of the Chamber.
We ought all to be able to contribute to the discussion as to what sort of taxes should be levied upon our people. According to the constituencies that we represent, and the district or region, and the different problems which exist there, we ought to be able to put our points of view when the Budget is being devised. This is a problem that we have not yet been able to overcome, and we cannot overcome it in this present situation.
I shall be very interested to listen to the Financial Secretary telling the House how he is likely to undertake the exercise with regard to replacement revenue. He cannot, on a trial and error basis, come to the House of Commons from time to time as a messenger from the Cabinet and say "How about this for size?" He cannot come to the House and say "How does the House react to this sort of tax?" Conservative and Liberal Members might come together and say "That is no good. Take it away and let us have a look at something else."
It is not possible then for the Financial Secretary to come back again from the Cabinet and to say to the House "I have had a look at the other possible courses. Try this one." That would not be a very positive method of devising means by which we could assemble the revenue, in other words, by that sort of trial and error process—"Try that for size" or "Take it or leave it". We cannot do that in the situation that we have at the moment.
This brings me to the point that the Left of the Labour Party—or, indeed,


the Right of the Labour Party—has always recognised the limitation of House of Commons procedure when it comes to initiating a positive contribution towards the whole process of policy making. It cannot be done in the House of Commons in a successful way at all, because we can stop things in the House only by coming together. A new move cannot be initiated. Coalition of any sort, therefore, whatever form it takes, is a very negative thing. It can never be positive within the parliamentary system.
There was a reference to a newspaper called Tribune. Other groups of people support other kinds of newspapers and there are various groups in the House, but those who support Tribune have never seen the way forward as being a link with the Conservatives for the purpose of defeating some particular aspect of Government policy, for the simple reason that, having defeated something and therefore stopped it, it is not possible for ideological opposites to come together and initiate an alternative which is satisfactory to both elements within the coalition which originally created the situation.

The Chairman: Order. I should be grateful if the hon. Gentleman would relate his argument to the amendment that we are discussing.

Mr. Atkinson: I should have thought that it was extremely germane and relevant to the problem that we now face. However, I think that I have made my point.
I hope that, if the amendment goes through, the Financial Secretary will have some discussions with the petrol companies and will make it clear that they have a wide social responsibility and commitment not to try to replace any of this tax reduction by an additional profit margin, however justified or convenient they may feel it is to make an additional levy. In other words, I hope that they do not think of this as being a convenient way of increasing their margins. I hope that the Financial Secretary will make that clear to the companies in the discussions.
On the selective rebates which have been suggested, the Labour Party in its current documents sets out good reasons

why they are not possible on a regional basis.
I think that President Carter is to be congratulated on some of the unpopular comments that he has made about petrol and oil consumption in the United States. What the Government are trying to do is contradictory to an industrial policy. It is absolute idiocy to push up the price of petrol and at the same time to say to British Leyland that the Government will restrict the money available for the development of the small car. We had some lunatic on behalf of the Government say that they saw the future of the British motor industry without a small car.

Mr. Dennis Skinner: Who was that?

Mr. Atkinson: That was said. There is a contradictory development here. I believe that we should go some distance along the Carter road. We should he thinking and devising ways of ensuring conservation. For instance, I should like to see the imposition of a road fund tax on petrol of so much per gallon instead of £40 a year tax on a motor vehicle. We should transfer the tax to so much per gallon. That would be a direct way of making the gas guzzlers, as the Liberals call them, pay for their excessive consumption of fuel. That would be a good way of relating engine design to our national needs.

Mr. Robin Maxwell-Hyslop: I thought that the Chancellor promised last year to end the vehicle tax and to put it on fuel. However, he has not told us why he is not doing that. In fact, he has increased both. That is not what he promised last year.

Mr. Atkinson: It is true that my right hon. Friend referred to setting up an internal study of how to do away with the road tax and to devise another system. That adds further to the contradictory situation. If we want to move towards increased taxation on petrol, we should at least first get right the question of the small car industry. I take it that question will come up in the discussions.
I remind the Financial Secretary of the discussions within both the trade union movement and the Labour Party about future designs of smaller engines and smaller consumption of fuel. I hope that we shall move in that direction.
5.45 p.m.
President Carter's taxation ideas are related directly to the size of the car. That approach led to bad motor car design years ago when we had graded taxation according to the size of the engine.

Mr. Pardoe: The difference is that in America cars cost an enormous amount of energy to make—far more than here. Has the hon. Gentleman seen an estimate by Sir Ieuan Maddock, who was chief scientist at the Department of Energy, that the typical American car costs as much to make in energy terms as it uses in the whole of its lifetime?

Mr. Atkinson: I am grateful to the hon. Gentleman for those interesting facts. They relate to the whole of the argument. I hope that before long we shall get down to the business of energy and cost efficiency in the design of motor cars and that we shall encourage our engineers and designers to consider conservation of scarce resources. We should have a co-ordinated approach towards the design and manufacture of the small car and the whole question of energy costs and saving to prove that we are going in the same direction.
My final point relates to VAT. I take it that it is universal opinion that we should not trail after our European neighbours or the member States of the EEC but should retain our 8 per cent. VAT. We should be very reluctant to consider a further increase in VAT. It is directly related to the cost of living. Therefore, we should do everything possible to avoid increasing the retail price index in that way. I come back to my point about Treasury Ministers coming to the House of Commons with their various experimental ideas. I hope that one will not come down the line in future. There should not be any increase in VAT. I hope that the message that goes back will be that we have tried it for size, that it does not fit, and that it is not acceptable to the Committee.

Mr. Maxwell-Hyslop: As I pointed out in an intervention, we have not yet had an explanation why the Government have not done what they intimated that they would do—namely, to transfer the flat-rate vehicle tax on to the actual fuel consumed. There would be a number of advantages in doing that. One is that we should no longer have to employ

people to collect the vehicle excise tax. We should still need to have registration of new vehicles and change of ownership, but the considerable amount of work involved in collecting the car tax would be reduced. In order to yield the same amount of net revenue to Government, we should not have to collect the same amount in extra fuel tax as was collected in vehicle excise duty.
The hon. Member for Tottenham (Mr. Atkinson) pointed out that at one time vehicle excise duty was collected on the basis of engine size. Actually, it was worse than that. It was not the engine size but the diameter of the cylinders in the engine. As the stroke was not taken into consideration, that resulted in the perversion of engine design, which gave us very long-stroke engines. There is no rational formula for allocating taxation—if one is concerned with fuel saving—to engine size, because actual fuel consumption depends on the efficiency of design, the all-up weight of the car, the drag and the gearing employed.
I am glad that in this context the Secretary of State for Transport has announced the forthcoming alteration to the speed limits. If a manufacturer is to have a rational gearing for a car, he will not want lower cruising speeds on dual carriageways that are not motorways, and even lower cruising speeds on roads that are Class A but not dual carriageways. That would present the designer with an impossible task in selecting the proper gearing for the car. If, by having higher permitted speeds one can have higher overall gearing, this will be felt in indirect gears as well. It is not helpful to the manufacturers if this is done at the last moment. The earlier the announcement the better.
I would not have objected to the increase in fuel tax if it had been a substitute for vehicle excise tax. In rural areas, as well as those people travelling to work each day—who might be assisted by a tax allowance—there are retired people and housewives without any earnings relief from taxation. They are totally dependent on cars for shopping, visiting the doctor and a whole spectrum of purposes, but they do not consume very much fuel in the course of a year. The £40 a year excise tax is a very severe burden on them.
If I may put in a personal note, my old 1947 Morris Eight, which is not unknown to hon. Members, has done 191,000 miles and is well matured. This year it cost me £40 in excise duty, which is £5 more than I paid for it, fifth-hand, 15 years ago. In country districts many people are extremely hard up. They have cars that are second or third-hand, and therefore they have to meet heavy repair and maintenance charges. Among other things, there may no longer be a local garage doing repairs where they live. They may have a garage that is only a filling or service station. Imposing an increased vehicle excise duty on these people when we should be getting rid of it altogether seems rather topsy-turvy to me.
If we are interested in making efficient use of our energy resources, the case against individual vehicle excise duty is overwhelming. If we are interested in the efficiency of tax collection, and not losing a lot of the money raised from tax in the process of that collection, we must agree that the vehicle excise duty is an inefficient way of going about things. The case that the Government have to make is the case not only for greatly increasing the cost of motoring but for increasing it in this manner.
The Government would have had no complaint from me if they had increased excise duty by 5p a gallon in place of the existing vehicle excise duty. It is not hard to do the sum. Assuming that a motorist does 30 miles to the gallon and drives 4,000 miles a year, an extra Sp a gallon in excise duty would pay the £40 a year of vehicle excise duty. In many rural areas, people may drive even less than 4,000 miles in a year. Quite a lot do only 1,000 or 1,500 miles a year, but their cars are still indispensable to them. To in-increase the vehicle excise duty by more than a third and then to increase fuel tax on top of that imposes a very onerous burden on them.
Some hon. Members have mentioned that some garages have actually increased the price of petrol to the consumer before using up all the petrol they had in stock at the lower rate. That may well be so. Certainly small rural garages are short of capital anyway. When the tax goes up they have to find, out of thin air, more capital to refill their tanks with the same

amount of petrol before selling to the consumer, and because credit is not given these days for petrol supplies to garages, they have to pay for their fuel on delivery. That is the standard practice. If the excise duty on fuel is increased by 5p a gallon, and a garage has a tank capacity of 25,000 gallons, that garage must find £1,250 from thin air just to finance exactly the same service to the community as before—that of not running out of petrol.
Garages in rural areas pay higher prices for petrol anyway because they take smaller supplies and because they are generally in the more outlying zones. They have more capital tied up in the business. Therefore they have to find this £1,250 out of thin air. In many cases, this means that they have to borrow the money from the local bank, in which case they will be paying interest on it. They have to widen their profit margins to the consumer in order to pay the interest and eventually to pay back the bank. It is a never-ending process to get the money back. When the tanks are empty, they have to be filled again; therefore a permanent increase in working capital is needed.
Inflation has grossly eroded the ability of many small businesses to remain in business. That is another aspect of the rural transport problem. Enough has been said about the necessity for not imposing this increase in petrol tax without abolishing vehicle excise duty. People with cars in rural areas are finding increasingly that they have to go further and further afield for car repairs. If the proposed changes in MoT testing mean that such tests can be done only in big towns, there will be an additional great expense, as well as inconvenience, for people who are dependent on their cars for getting to work, for shopping, for visiting the doctor or the hospital, and for normal social intercourse.
It is certainly the case that a revived rural bus service is not the simple answer. By the very nature of its route, it is bound to be slow in getting from point A to point B if it has to serve a large number of villages.
6.0 p.m.
People who believe that the minibus is the answer forget that a public who have got used to relying on getting on the bus when it comes will not take kindly to


finding that the minibus is already full and that therefore an appointment cannot be kept. One can make any transport system pay by running such small units that it is always running at full capacity and queues of people are left behind. If that is the only bus that day, it is no solution to people's transport problems.

Mr. Ronald Atkins: Would the hon. Gentleman not also agree that a large part of the cost of running a bus is the labour cost?

Mr. Maxwell-Hyslop: Yes, certainly. It takes no more labour to run a large bus full of schoolchildren than a minibus which cannot be used to take 50 children to and from school. The public often do not appreciate, when they see a large half-empty bus and wonder why a smaller one cannot be used, that another fleet of buses would be needed for schoolchildren. The result would be higher operating costs, not lower.
The conclusion that one is bound to draw is that the Treasury decided on this tax increase without considering its social effects, regarding it purely as a revenue device. Advised, probably rightly, that the demand for petrol is not very price-elastic, those concerned rubbed their hands and said, "The yield will be another 5p on each of the existing number of gallons sold. That is easy to predict and budget on, so it is an ideal way of raising a tax."
They entirely forgot that straws can break a camel's back. People's incomes are rising not all or much more slowly than the cost of living; they have increased rates, water rates and electricity charges to meet as well as the general increase in the cost of living. All the spares and servicing for their cars will cost more anyway with the onrush of inflation. Whatever has been said, many people know that a new car is something that someone else will have but that they will never have: their future will be one of operating second- or third-hand cars. In that situation, it is not only unwise but heartless to impose such a tax and literally to be careless of the hardship that it will cause.

Mr. Ronald Atkins: I entirely agree with the hon. Member for Tiverton (Mr. Maxwell-Hyslop) about the vehicle duty. It is significant that speeches against that

duty today have been made from the Back Benchers rather than the Front Benchers of the Opposition—if I may elevate the Liberal Bench to the status of an Opposition Front Bench. Although the right hon. and learned Member for Surrey, East (Sir G. Howe) spoke about discrimination against the derv tax, which is left as it is, he said nothing about the vehicle excise duty, which is also unchanged.
The hon. Member for Cornwall, North (Mr. Pardoe) also had no complaint against the excise duty being left as it is. The heavy lorry users of derv do not meet their resource costs, whereas the motorist with a small car which does a low mileage pays far more than a fair share of the taxation. It seems fairer to remove the excise duty than to remove the 5p a gallon petrol tax.
I speak for all low-income motorists—I understand that there are more in Cornwall than elsewhere—who would gain from the abolition of this tax. The rural motorists probably use their cars for lower mileages, since among the urban motorists are many long-distance travellers who have the benefit of company cars and considerable tax relief.
We should not forget that the excise duty is inequitable. It is so difficult for the lower-income motorist to pay. He has to find £50 all at once at the same time as he pays his insurance. One of my constituents finds it so difficult to find the £50 that he pays it quarterly or four-monthly and pays his insurance month by month. That is much more expensive in the long run and much more harmful to the lower-income motorist.
If such a motorist were to pay all his tax in the petrol price, he would be able to estimate more accurately the cost of his journey and compare it with public transport. That would be in his interests and in the interests of public transport. I urge the Government to proceed with the sound idea, which is practised in most countries, of putting the burden on the petrol tax rather than the vehicle duty.
I was worried by what the hon. Member for Cornwall, North said about oil conservation. He seems to live in cloud-cuckoo-land, apparently believing that the shortage of petrol is far in the future. Two recent reports, one from BP and one from a professor in the North-East


of England, as well as many reports from the United States, show that the danger of oil shortage is much greater than we have supposed. It is all the more unfortunate that the hon. Gentleman should minimise the dangers. He said that there was more possibility of our running out of other things, like certain foods, but the dangers will be greater still if we run out of oil.
The hon. Gentleman twisted the figures somewhat to back his case. Nearly all experts agree that a bus uses less energy than a car per passenger carried. The hon. Gentleman can twist the facts by reducing the number of passengers in the bus and increasing the number in the car and show that there would be little difference. Of course, if there were eight or nine passengers in a big bus and four or five in a car, no doubt the bus would consume more energy per passenger. However, although such a situation may arise in some areas, with increasing shortages of petrol, our taxation policy should favour a sane transport policy by increasing the number of passengers in the bus so that the maximum number will be carried.

Mr. Ridley: The trouble is that if the passenger does not want to be in the bus the hon. Gentleman would have to direct him to go into it, and that is not acceptable in terms of individual liberty.

Mr. Atkins: What I am suggesting is that our taxation policy must be directed towards eventually getting a sane transport policy. Eventually, because of oil shortages, passengers may be forced to use buses. It is better for us to try to conserve petrol now than to be forced into much more desperate situations later. On the other hand to allow, as the hon. Member for Cornwall, North seems to be prepared to do, the death of rural public transport, is frightening.

Mr. Pardoe: If the hon. Gentleman knew Cornwall as well as I do he would reckon that the death of public transport has already taken place and that it is only its ghost which is around. I am just preparing for its exorcism, which will undoubtedly take place. I have a letter from the director of the Transport Studies Unit, University of Oxford, in which he says:

I am enclosing a copy of a table I published in an article in the Surveyor, entitled 'Energy Conservation: Facts for Fiction'. You will see that the energy cost (which relates almost entirely to fuel costs) of bus and car in rural areas are almost exactly the same".

Mr. Atkins: I would refer the hon. Gentleman to a better source of facts on energy use—the National Council on Inland Transport—which includes a number of academics and which will produce an entirely different set of figures. Moreover, I take the position that it should be our object to provide buses and to give rural transport services assistance because many people who will never be able to use a car anyway are living in the country. They include a large number of old people as well as a number of schoolchildren. Public transport will be absolutely essential for them. It is interesting to note also that if we were to denude rural areas of all bus services we should find it difficult to get buses for schoolchildren even if they were specially hired for that purpose.
The hon. Member for Cornwall, North gave a figure for the carrying of freight by road which seemed to suggest that other modes could not be used for carrying some of that freight. The hon. Gentleman mentioned 92 per cent. as the amount of goods carried by road out of the total carried in this country. But, of course, unlike goods carried longer distances in heavy lorries, the roads take only 72 per cent. It would be possible, as surveys have shown, for railways to be competitive in this regard and while not by any means taking even the larger part of that 72 per cent. they could certainly take a significant part. We shall have to look at other modes to some extent to reduce our reliance on petrol.
I turn to taxation relief for people who travel to work. If everyone who travels to work by private car were to be given taxation relief the result on urban sprawl would be very great. It is forgotten that anyone who lives away from the centre of a town naturally finds property cheaper. If a person were allowed to deduct taxation on earnings for this, naturally more and more people would drift outside the towns. Of course many people now use company cars to get to work, and they get tax relief. It would seem to me a fair compromise that relief should be given to those people who use


public transport to go to work. That would help maintain public transport services, reduce the use of petrol and in that way solve one of our problems.

Mr. Paul Hawkins: I would also compare Norfolk with Cornwall because there our rural bus services have almost died out. On every estimate that I can make at least one-third of the male population in my area go to work by car because no bus can possibly get them there. It is an average distance of about 15 miles out and 15 miles back. That is about 5,000 to 7,000 miles a year, for which these people have to pay the cost of getting to work and, of course, they are taxed on the extra money they earn because they go into towns rather than stay in their own villages. I do not believe that travelling to work in buses would help the majority of my constituents who go to work by car.

Mr. Atkins: I agree that in a case like that it is as the hon. Gentleman says. It is interesting that he mentioned 5,000 to 7,000 miles a year, because that mileage has been stated as being the breaking point when it is cheaper for the man who travels 7,000 miles or less to have taxation put on petrol instead of on vehicle duty. That is the break-even point. It is significant that the hon. Gentleman should have used that figure.
I urge the Government to consider this more equitable form of taxation. By abolishing the vehicle duty and instead putting the amount of tax on petrol, we should help to conserve energy. I hope that a more serious view will be taken by both the Government and the Opposition of the need to conserve energy supplies, especially oil supplies.

6.15 p.m.

Mr. Skeet: The hon. Member for Preston, North (Mr. Atkins) is obviously a doomwatcher. He imagines that tomorrow, or in two or three years' time, oil will run out.

Mr. Ronald Atkins: I did not say that.

Mr. Skeet: As the hon. Gentleman knows perfectly well—

Mr. Ronald Atkins: I made no such remark. Since the hon. Gentleman expects me to mention a figure, I am say-

ing that in 15 years' time the shortage will begin to show and in 25 years' time it will really bite.

Mr. Skeet: In about 15 years' time the price of oil will probably have risen to about $30 per barrel. By that time petrol will be extracted from coal and the whole cycle will begin again, and there will be no shortage at all. Therefore, one has to take the arguments about conservation a little guardedly.
What worried me was that the Chief Secretary spent all his time trying to support the idea of an increase in petrol tax without bearing in mind that consistently, since the tax was first introduced, it has gone up and up, and everyone considers that the poor driver is the person who can be milked on almost every conceivable occasion. The Chief Secretary made the observation that we shall have to come back to this sooner or later. The poor motorist will have to put his head on the chopping block yet again.
Is the Chief Secretary aware that 50 per cent. of households, with incomes as low as 60 per cent. of the national average, have at least one car and that to these people an increase in fuel tax represents a burden, particularly the £10 increase in the annual licence fee? If we take an average family of two adults and two children, with a 1500 cc car running 10,000 miles per annum and an income of £4,000 per annum, the tax reduction figure works out at approximately £64 per annum. But 50 per cent. of that will be lost because the family will be paying £31 tax on petrol and excise duty.
What the Chancellor has done is make one concession to reduce income tax, yet he is taking 50 per cent. of it back again. The time has now come to look at this realistically and bear in mind that the motorist must be considered first. Before he left the Chamber the Chancellor referred to the momentous work that President Carter is doing in the United States. But the situations there and here are entirely different. The United States is importing oil at the rate of 9 million barrels a day, and therefore something had to be done. The price of high grade petrol is 37p per gallon as opposed to 85p to 90p in the United Kingdom. Everybody knows that the 5 cents increase in America will be traded off.


But in the United Kingdom we are assuming a position of self-sufficiency by 1979–80 and, of course, the tax is very much higher.
The hon. Member for Cornwall, North (Mr. Pardoe) said that the demand for petrol in 1976 had been 16·9 million tons, which represented a small increase of 5·2 per cent. over the previous year. However, in the first quarter of 1977, North Sea oil substitution accounted for about 30 per cent., or 4·2 million tons of petrol, over a full year.
If we have ample stocks of petrol, why should not a few of the beleaguered motorists of the United Kingdom be allowed to take advantage of it? The motor industry has to contribute about £4 billion in taxes. The motorist has been milked and milked again, and we are told in this Budget that but for the fact that it was known that the Liberals the Conservatives and others would vote against the proposals he would have been milked again on this occasion.
Then there is the conservation argument. Why are the Government tackling 20 per cent. of the barrel? I am equally aware that fuel oil is subjected to a very heavy tax, and there is little justification for that, either. However, that takes a larger part of the barrel. The Government should bear in mind that this is not so much a tax on oil as a tax against oil to satisfy the coal lobby.
I make one observation in passing. The argument has been put forward time and time again that the United States has not been alone in putting an imposition on petrol. But I invite hon. Members to compare pump prices in pence per gallon for premium motor spirit in March 1977 in various countries in Western Europe. In West Germany the price was 101p, in France 123p, in the Netherlands 117p, in Belgium 108p, in Sweden 107p and in the United Kingdom 90p. Hon. Members will see that the tax percentage of the pump price in the respective countries is 58, 59, 60, 57, 49 and 50. On that basis, therefore, it is right for the Chancellor of the Exchequer to say that the United Kingdom is the lowest taxed in Europe, with the sole exception of Sweden, where the figure is 49 per cent.

Sir Raymond Gower: Will my hon. Friend take into account the fact

that in relation to average earnings the tax in this country is far higher than it is in comparable circumstances in West Germany, Sweden, and so on? He is not making a fair comparison.

Mr. Skeet: I was about to move to the second phase of my argument and to make the very point that my hon. Friend has in mind. I relate hourly earnings with motor spirit prices. Doing that, I find that the United Kingdom has a purchasing power of 100, Belgium has 123, Sweden has 178, and West Germany has 146. We have to remember that in West Germany and these other countries, total tax is very much lower than it is in the United Kingdom, and these figures are before tax. So let us not hear about what is happening in the United States and in Western Europe.
Still on the conservation point, let me refer the Chancellor of the Exchequer to paragraph 41 of the Report of the Select Committee on Science and Technology on Energy Conservation. He will see that the Department of the Environment came up with an interesting piece of evidence, that
without drastic interference in consumer choice—for example by petrol rationing or by seeking to double car occupancy without increasing total passenger mileage—no single measure applicable in the transport field, even in the long term or to the fullest conceivable extent could save more than about 2 per cent. of total primary energy, and most would save less".
It is no good continuing to chase the motorist. The motor car is indispensible, for a number of reasons. A person living in the country finds a motor car indispensable to him if he is to get from the place where he lives to work and home again. People regard the car as part of their station in life, despite the Government's efforts to tax them to death.
What is happening here is that the Government are simply putting on to the poor motorist loads of tax, hoping that he will be able to contribute a little more. The Chancellor must recognise that the Government are taking from the motor car tax and associated taxes £4,180 million every year. They contribute 25 per cent. of total expenditure taxes. Therefore, I am rather disconcerted to discover today that the Chancellor of the Exchequer wants to return to this later and pound the poor motorist once again. Before he does so, I suggest that the right hon. Gentleman should think about


the country and should study the figures in recent by-elections.

Mr. Walden: I am very uneasy about what is happening here today, and I am all themore uneasy because I have no particular stircture either on the Government or on the Opposition parties, and no strong feeling either way about this tax.
In the first place, I do not blame the Government for introducing it. Whatever may be urged by hon. Members, its introduction barely keeps pace with the rate of inflation in terms of the tax revenue that could have been expected. I know that legislators do not like to be told that, but it happens to be true. I do not blame the Government for dropping it, either. Presumably their business managers have made the right calculations, despite the scepticism of the hon. Member for Cornwall, North (Mr. Pardoe), which I do not share. The figures produced by Whips are never wrong. If the Government did not have sufficient votes it would have been childish of them to go on pressing for a provision for which they knew they would not get approval.
I do not blame the Opposition. The Conservative Party said that it did not want this tax and, very properly, added that it would have been better to have a VAT rate of 10 per cent.
I do not blame the Liberal Party, either. As the hon. Member for Cornwall, North rightly said, Liberal Members have to look after the interests of their constituents, though I cannot quite accept that they did not have some other motive in mind as well, namely, that some rare and refreshing fruit in terms of actual power had to be demonstrated to show that there was some rationale in the arrangements that they had made with the Government.
It is not any of that which worries me. What worries me is the very factor in which some hon. Members, especially the hon. Member for Cornwall, North, are taking more than pleasure. It is the belief that this is how a legislature shows its power over a Government and that this is what we want more of in the future.
As one who is passionately anxious for the legislature to have more power over the Government and who is exceedingly sceptical about all Departments of Government, especially the Treasury and the

Inland Revenue, I know that this is exactly what I do not want to be the pattern of the future.
In my opinion, occasions like this get legislators a bad name. The two really crucial issues before any legislature that takes taxation seriously and plays a constructive part in devising it have nothing to do with taxes on petrol, on cigarettes or on alcohol. I speak as a car owner, a drinker and a smoker, and as one who represents a constituency in which a great many cars are made and used. In that sense, I have an interest exactly similar to that of the hon. Member for Cornwall, North. My constituency interest is also in favour of this tax being aborted at the stage which we have reached.
6.30 p.m.
I take comfort from the fact that, on the basis of what we now know, the Budget was probably not quite as expansionary as it ought to have been, so no grievous harm has been done, unless we begin to accept this sort of thing as a pattern and forget the two essential points that as legislators we should be thinking about. The first is the vital need to keep in our minds, the minds of those who vote for us and, even more importantly, the minds of the people who select us, the link between expenditure and taxation. A large number of our problems arise because Government expenditure is much too high and continues to be much too high in spite of the recent cuts.
Secondly, the taxes that have to be raised to meet too high a level of expenditure are wrongly levied in this country. That is a view that I have been stressing for years and now appears to have a certain acceptance on the Government Front Bench. Our level of direct taxation—income tax—is ludicrously high, and our rate of indirect taxation is not taking enough of the burden.
If the legislature were doing its job as I would wish, far from castigating the Government about petrol tax and telling the populace how monstrous it is that a section of the population should suffer from an indirect tax, it would think that the Government deserved a certain measure of congratulation. The hon. Member for Bedford (Mr. Skeet) said it was terrible that the Government had given some relief on income tax but


had taken half of it back in indirect taxation, at least from car owners. I disagree with the hon. Gentleman. That is not terrible. It is marvellous. I want years and years of the Government cutting income tax and meeting the shortfall by increasing indirect taxes.
I know that one can argue that the Government should not have increased the cost of fuel but should have raised the money in some other way, perhaps by raising the rate of VAT. I shall come to that point in a moment. The Government might have some other form of motor taxation, which I would be wholly against.
I agree that we should look at the vehicle excise duty. I would prefer to sec it go altogether and have a higher tax on fuel for the reason so often put forward by Conservative Members, that of choice. There is no choice in keeping a car on the road after one has paid the duty, but there is a certain measure of choice, even in rural areas, in how frequently one uses one's car. Tax should always fall where there is the greatest element of choice.
In all these ways I find that what the Government have done is not so terrible. It is not so terrible, either, that the House should have reversed the verdict, through the power of argument or the mathematical calculations of the Labour Whips.
What would be a tragedy would be for us all to say afterwards "This is how the legislature will work in future. What a wonderful thing it is not to have majority Governments!" We should never forget the old jibe about the Congress of the United States in the nineteenth century, that it voted for all the appropriation Bills and against all the taxation Bills.
In that connection I noticed with interest the comment of my hon. Friend the Member for Tottenham (Mr. Atkinson). It is exactly the views of people like my hon. Friend that lay on the Treasury the need to raise taxes at that level. My hon. Friend least of all—he is an old friend of mine, and will not mind my saying this—should talk about how taxation oppresses various classes of the community. Those taxes are raised to pay for some of the schemes that he most favours, which have produced

the very situation described by the hon. Member for Cornwall, North. The hon. Gentleman honestly and honourably said today "For God's sake let us have no more bus subsidies, because they will not solve the problem of my constituents or improve the transport system in Cornwall. They will only waste more public money, which will mean more taxation."
That is the point I want most to put. The whole matter has no doubt been great fun, especially for Liberal Members. I do not think it has done great harm, because the Government are possibly taking in too much in taxation this year, judging by what we now know about the state of the economy. But this is not the way in which the House of Commons ought to discuss these issues.
Having said some harsh words about my hon. Friend the Member for Tottenham, I turn to a matter on which I entirely agree with him. The convention whereby we are not allowed to suggest replacement for taxation that we do not like is nonsensical. We ought to have the right to discuss major areas of the Budget before the Budget is even presented. Secondly, we ought to have the right to say that we do not like a particular tax and to suggest an alternative which does not produce a revenue shortfall. That is what I would like the legislature to do.
However valuable this discussion has been for the constituents of the hon. Member for Cornwall, North and mine, however much it may be a petty triumph over the Government, it is not the rôle I want for the legislature. I do not want anyone, including myself, to kid himself that it is.
The Conservative Opposition have acted perfectly honourably. They have said all along that they want a switch to indirect taxation, and I think that they are correct. Increasingly, the Government have come to meet them on that point, as general opinion in the country has, as it is increasingly realised that the old scenario that direct taxation was progressive and indirect taxation was regressive is wrong and leaves out of account the wide area of choice that is left to people and the regressive nature of our taxation system, which has an entry point so high up the scale. The Government have come to see this. The Opposition were even fair enough to say that the Government should not increase


petrol tax but should bring VAT back to 10 per cent., and that they should not have reduced it to 8 per cent. in the first place. That is correct.

Sir Raymond Gower: I agree with the hon. Gentleman's broad theme about the desirability of switching from direct to indirect taxation, in comparing tobacco tax with petrol tax as alternatives, but is he not underestimating the plight of people with limited means in rural areas, whose dependence on motor cars is far greater than he seems to assume?

Mr. Walden: That is a good point for me to conclude on. It is exactly that sort of opinion that worries me most.

Sir Raymond Gower: Why?

Mr. Walden: I am an old friend of the hon. Gentleman's, so he will know that I am not attacking him personally when I reply that it is too easy. VAT could easily become like income tax. Does the House ever have a serious discussion that is likely to change anything about the level of income tax that the Government say they want? I have been in the House for a long time. It is always the same story. Governments put up their income tax proposals and the Opposition say that they are too high. Even Labour Oppositions do that. My right hon. Friend the Chief Secretary and I used to do it. We complain about the Conservatives' rate of income tax and they complain about ours. The complaints are never taken seriously. Everybody assumes that what is proposed is what will be paid.
The Treasury even has a cant phrase to deal with the matter, speaking of "equity between taxpayers" one of the most nonsensical phrases ever invented. It is used whenever a Minister is in trouble. When he is having to defend a monstrous rate of tax, such as the 83 per cent. on the top level of incomes plus the investment income surcharge of 15 per cent., he can always say "This is equity between taxpayers". We should not allow VAT to become the same sort of tax. It falls on a wide range of goods purchased by everybody. We do not want to accept that because there is a shortfall in revenue and we do not want to increase income tax we shall increase VAT.
I have no doubt that what the hon. Member for Barry (Sir R. Gower) said

about elderly people needing motor cars in rural areas was true. But how many hundreds of other examples could every other hon. Member concoct to show that a needy, deserving or socially valuable group should also have a tax concession?
This is how we have always done it. We have never taken much notice, in taxation terms, of the Bills that we pass that cause the taxes to be levied. We forget all about that.
We never seriously expect to affect the rate of income tax. Apparently, we are not going seriously to expect to affect the rate of VAT. But about the buttons and bows, about invalid carriages, about what happens in rural areas to owners of motor cars, we have an enormous amount to say, and congratulate ourselves, as legislators, that that is controlling the Executive. It is not, and nothing that happens today should persuade us that it is. We should direct our minds to those proposals that would enable us to have a genuine rôle in a discussion of the taxes that could be raised and the taxes that could be dropped and replaced by taxes that the legislature and not the Executive wants. That is the sort of control by the legislature that I want to see.

Mr. Crawford: I hope that the Committee will forgive my confusion. I had originally intended to speak to the amendment standing in the name of my right hon. Friend the Member for Western Isles (Mr. Stewart) on behalf of the Scottish National Party. It was identically worded to the Conservative Amendment No. 3 in seeking to delete the whole of subsection (1) of Clause 4. Our amendment was printed on the Order Paper of 2nd May, but because of the chaos involved in the redrafting of the clause, it has been subsumed, like Amendment No. 3, by the Conservative manuscript amendment. I sympathise with the Conservatives in this chaos, caused by a Government who do not really know what their own Bill is about because the Liberals appear to have changed their minds.
I am glad that the Liberals have had a change of heart about the 5½p increase on petrol tax. I listened to the heartrending story told by the hon. Member for Cornwall, North (Mr. Pardoe) about


the difficulties of people in his area in relation to public transport. It is a pity that the Liberals did not vote against the proposed increase on the relevant Budget Resolution. I am glad of the support that the Conservatives are giving against the proposed increase, and also of their comments on the need to keep the car licence duty down. But when the SNP went into the Lobby against the Budget Resolution increasing that duty to £50 it got very little support from the Conservatives. Only about 40 of them—and only three Scottish Conservatives were among them—came through with us.
The SNP is not happy, either, with the differential between private cars and heavy vehicles. Scotland, in population terms, has much longer road distances than England has—even longer than Cornwall, in relative terms. It is therefore relatively more dependent, per person, on road transport than England is, and the costs in our rural areas are the greater on the roads because so much more is carried on the roads.
6.45 p.m.
I am informed by the British Road Federation that in Scotland 90 per cent. of inland freight tonnage and 99 per cent. of food, drink and tobacco goes by road, and that 96 per cent. of users' expenditure on freight goes to road transport. If it were possible to increase those percentages, they could hardly be increased for Scotland. This is not the time for me to talk of our proposals for haulage charges, either on the mainland or for the Islands, but we wish to implement the Norwegian system whereby charges for haulage over water are charged as though over land.
The hon. Member for Wycombe (Sir J. Hall) mentioned the use of post buses. They are a help, but they are not the answer in their present form. If one lives at the end of such a bus route, one cannot get back to one's dwelling place on the same day. One has to stay overnight in the centre from which the bus is to start the next day.
The situation emphasises that Scotland's imports and exports depend heavily on road haulage. We therefore welcome the decision not to increase the tax on petrol for cars, but we are not happy that the relief, will not be extended to heavier

vehicles. The Chief Secretary said, ominously, "We shall have to come back to the petrol tax." Those words were ominous to people not only in the rural areas but throughout the country. The right hon. Gentleman also made the ominous statement about offsetting the loss of revenue.
The SNP will not accept anything that offsets the loss of revenue by raising whisky duty yet again—that has gone far enough. The need to offset the loss of revenue by raising other taxation may or may not be necessary in the context of England, but it is not necessary in the context of Scotland, because the revenue from Scottish oil, running at about £1,200 million this year, rising to £3,000 million by the end of the decade, is an awful lot of offset.
While the SNP is not in business to put the right hon. Member for Finchley (Mrs. Thatcher) into Downing Street, it is in business to oppose those parts of the Finance Bill that are against the best interests of Scotland. That is why we shall be voting with the Conservatives on their manuscript amendment, and also for Amendment No. 6.

Mr. Ridley: I would like to ask a question of the hon. Member for Cornwall, North (Mr. Pardoe). The right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) told us that the new arrangement between the Government and the Liberal Party meant that there would be a new element of stability in our affairs. How come, then, that the first event in that arrangement is that the petrol tax is put up on 5th April and is now to be put down again on 5th August, if the Government amendment is carried, as I gather it will be? That seems to me to be somewhat unstable. Moreover, there has been all the talk about what would happen. It was going to happen on the night of the Budget Resolutions, but it did not. Now it is to happen tonight, but it will have no effect until August. That is hardly a stable way of carrying on the affairs of the country. I wonder what has gone wrong.
We are told that the hon. Member for Cornwall, North would have enough friends to defeat the increase in petrol tax—indeed, the Government have more or less acknowledged that fact by putting down their own amendment. But I do


not understand how that can be described as a product of the Lib-Lab deal; surely it is a product of the "Lib con". It seems to me that the Lib-Lab deal is being torn up this evening and instead, surreptitiously and without trumpets being sounded, the Liberal Party is coming into the Lobby with the Conservatives. So this is a Lib-Con deal which has brought about this particular piece of "goody" for the Liberal Party. We must get this straight. I was interested to read in a Northumbrian newspaper a letter over the name of Lord Ridley, who is not unknown to me. He concluded:
O Beith, where is thy sting?
O Steel, where is they victory?
That seems to sum up this night's work pretty accurately.
What worries me is a point that was also raised by the hon. Member for Birmingham, Ladywood (Mr. Walden). What about the revenue? I forget the exact figures that the Government lose if their amendment is carried. There was a time when we were told by the Chancellor, huffing and puffing, that we would have to have 3p on a pint of beer. I can see no amendment or financial resolution down to that effect. The hon. Member for Ladywood is right in pointing out that we, as Back Benchers, cannot put down an amendment to increase the tax on beer. I had expected to see one to that effect from the Government, but it is not there, so I conclude that that is not to happen.
I hear words from hon. Members in all parts of the House that perhaps it is all right, that it should not happen because the economy is looking a bit more deflated than we thought 10 days ago, that a fillip of £300 million will not do the economy any harm, and the whole thing has been quietly forgotten and buried.
I remember a time—it was exactly three years ago—when I moved an amendment to the Finance Bill to reduce the tax on petrol from 25p to 10p. That was on 3rd March 1975. Having urged that case, I concluded that it would be wrong for me to press it to a Division because I did not believe that the revenue could accept the loss that would be caused in terms of the Budget judgment and our deficit.
I did not vote for the amendment, but one of the Liberals forced a Division

and the entire Government voted to uphold their tax. Those who voted for my amendment were all the Liberal Party, with one exception, the whole of the Ulster Unionist Party, the whole of Plaid Cymru, the whole of the Scottish National Party, and, strangely enough, two Tory Whips. I do not know how they got in there. They are both Whips now but, to do them justice, they were not Whips then. I am referring to my hon. Friends the Members for Beeston (Mr. Lester) and Bute and North Ayrshire (Mr. Corrie). Two people who did not vote were myself and the hon. Member for Cornwall, North. I do not know whether that was because he did not think the revenue could take it then. Perhaps he thinks that it can take it now, and I wonder what has been going through his mind about the effect on the borrowing requirement if we pass the amendment.
I believe that this is a defect in our procedures and that we should be able to increase other taxes, especially as the time has come when hon. Members can vote to achieve something. I make it clear that we should put VAT up to 10 per cent., which would about cover the cost.
My reason for doing that is that the sheer price of petrol is too heavy. It is 45p of tax, and roughly 40p of revenue to the Arabs, the oil companies and the petrol stations. The Government take more than all those three together. This is the sort of tax that one levies on luxuries—a tax in excess of the base value of the product—and I do not believe that we should continue to pile it up.
I do not think that President Carter's energy initiative was felicitously phrased. He said that America should lead the world to reduce the consumption of petrol. But the world is leading him, and has been doing so for quite a long time, because we use about one-third of the amount of oil that is used per head in America. Therefore, it is not for President Carter to tell us to follow his dashing lead by putting a tax on petrol, but for us to follow the lead so ably given by the Chancellor of the Exchequer in putting 45p tax on a gallon of petrol while he has been Chancellor.
These matters were discussed last weekend at the Summit Conference, and


I was delighted to see that the world leaders set an example in that energy-saving walk from Downing Street to Lancaster House. At least they saved a little energy, though I was surprised to read the comment of the right hon. Gentleman the Prime Minister on that walk. He was overheard to say to President Giscard d'Estaing:
It is very difficult. Steel is very nice. He is very honest.
I wonder what President Giscard d'Estaing's reply was to that, and I wonder, too, what the right hon. Member for Roxborough, Selkirk and Peebles thinks about the Prime Minister.

Mr. Pardoe: The hon. Gentleman used the word "honest" in relation to my right hon. Friend. The hon. Gentleman regaled the Committee with the extraordinary statement that the Chancellor of the Exchequer had raised the tax on petrol by 45p. As the tax on petrol, with this increase, is 39p, it would have been difficult for the Chancellor to have done that. Will the hon. Gentleman explain what has gone wrong with his figures?

Mr. Ridley: The hon. Gentleman leaves VAT out of account.

Mr. Pardoe: Does the hon. Gentleman mean that, with a total duty of 35p plus VAT, the Chancellor of the Exchequer has increased the tax on petrol by 45p in the last three years? That would be a little difficult.

Mr. Ridley: I might have made a slip, but I tried to say that the total tax was 45p from all sources. Perhaps I did not say it directly. If I did not, I apologise. I think that it is about that, depending upon the grade of petrol. I would not allege that the Chancellor of the Exchequer put on all that tax during his period of office, but he has put on tax after tax on petrol, and that I believe to be true until tonight's work if that is what has happened.
I think that if we are honest about energy policy we shall not feel that an increase is necessary in petrol tax, particularly as I agree with the hon. Member for Cornwall, North that we have proved that petrol is pretty well price-inelastic, and that it does not have any effect in terms of saving petrol to pile the tax on

to it in the way that we have done in the past.
I do not think that that is the answer to the energy problem. I think that if we are to look to an energy policy we shall have to talk about nuclear power, about new ways of finding oil and petrol, about coal, and about all sorts of other matters that should be outwith the scope of this debate. I do not think that it is fair to plead energy policy in defence of this tax.
I end by being as honest as I can on the question of where the money should conic from. I think that the hon. Member for Preston, North (Mr. Atkins) had it entirely and absolutely wrong when he said that we should spend more money on public transport to subsidise it more heavily, and that it was all right to tax petrol for private cars more heavily so that the money was there to pay that subsidy. Indeed, the hon. Gentleman went so far as to say that people should be forced into empty buses to fill them.
I do not think the hon. Gentleman will find that that is a very popular view in the country, but in any case it is an entirely wrong view. Here again I agree with the hon. Member for Cornwall, North that the right thing to do in the rural areas is to allow the private car to be the main, if not the only, form of transport, and allow licences to be granted freely—indeed, licences should not be necessary—for people to ply for hire or reward, taking those who do not have their own cars to wherever they want to go to shop, to visit the doctor, to see friends, or for any other purpose.
There are many retired people who would welcome the opportunity of doing that and who would not charge very much, and it would be of enormous benefit to the inhabitants of rural areas. To go on ploughing money into public transport is to cause these high rates of petrol tax and road tax to find the money to pay subsidies.
We have been going the wrong way about this, not merely because we thought that there was a genuine solution through the use of rural buses and other forms of public transport that are not really wanted, but because there is in the minds of many Labour Members, including many in the Government, a feeling of prejudice against the private motorist.
The private motorist does not fit into the bus. The tidy centralising mind would like to put him into a bus where there is a spare scat, but that is not what he wants. He wants the independence and status of his motor car. He wants the chance to live a life that gives him a new dimension of freedom—freedom to go where he wants, when he wants, and for as long as he wants.

Mr. Lewis Carter-Jones: What does the hon. Gentleman say about the real difficulty that is created for the motorist who gives lifts?

Mr. Ridley: I think that this matter has been dealt with. If not, and if the hon. Gentleman will help me introduce a Private Member's Bill to deal with it, we can deal with it next Friday. It is not difficult. The law has not been relaxed to allow lifts to be given without a licence. I do not know why the Chief Secretary wastes his time with this debate on this silly tax of his instead of devoting the afternoon to introducing a Bill to free licences for private cars. Then he could have the afternoon off and the Secretary of State for Transport could whip such a Bill through. We should all be delighted. If that had been done, the whole farce of this afternoon's debate—all for the greater glory of the hon. Member for Cornwall, North—could have been avoided.

7.0 p.m.

Mr. Malcolm Rifkind: We have witnessed an extraordinary phenomenon this afternoon. The Secretary of State, when he began to move the amendment, regaled the Committee with copious arguments as to why the increase which was announced in the Budget was not only desirable then but continued to be desirable to this day. He gave one convincing argument after another why the Government not only had been absolutely right at the time of the Budget but continued to be correct in insisting that the increase in duty was in the public interest and was in the interests of conservation.
Just as some hon. Members on this side of the Committee were beginning to be convinced by the Chief Secretary's argument, he finished his peroration by calling on the Committee to accept the amendment, which is designed to reverse the proposal made in the Budget.
I understand the reasons why the Chief Secretary sought to do that and why he is reversing his own proposals in the Budget. However, it might have been slightly more sensible and, indeed, perhaps have carried more respect if the Chief Secretary had put his original orders to the House of Commons and allowed it to reach a decision. If the Government had been defeated on such an occasion, so be it.
The actions of the Chief Secretary this afternoon suggested that he had a singular lack of faith in his ability to convince the House of Commons on such a move and that by adopting this course he was in effect anticipating defeat. He has backed down at the last moment without accepting the arguments which have been put forward.
The Liberal Party has argued ad nauseam that the back-down of the Government is a victory for the Liberal-Labour agreement. That is an extraordinary argument. For it to have any validity it would have to be argued that but for the existence of that agreement the proposal to increase the rate of petrol duty would have gone through. Such a proposition has only to be stated to be seen to be manifestly absurd.
We know that the Government are and will continue to be a respecter of the Liberal-Labour agreement as long as they are in a minority in the House of Commons on any issue on which they cannot carry hon. Members in any other party. However, since the Liberal-Labour deal, the Liberal Party has opposed the Government on any controversial issue—whether it be rural transport, defence, teacher training colleges in Scotland, or indeed this increase in the rate of petrol tax—but, nevertheless, for reasons of its own desperate bid for survival, is prepared to keep the Government in office for however many years the Government choose to hang on.

Mr. Pardoe: The reason for the Liberal Party's decision was a desire to keep the Tory Government out of office. This is a reasonable reason. If I have to choose between the devil and the deep blue sea, I do not see why I should choose either the devil or the deep blue sea. It is not I who have claimed that this reduction in the tax is due to the Liberal-Labour pact. If this tax were not coming off today, I


have no doubt that the hon. Gentleman and his right hon. and hon. Friends would be parading round the country blaming the Liberal Party for the tax. The hon. Gentleman must not take it to heart if I go round the country thanking the Liberal Party for having the tax reduced.

Mr. Rifkind: The hon. Gentleman cannot have it both ways. If he is going round the country saying that the Liberal Party is responsible for the removal of the increase, he must prove that. It is untrue to say that somehow, but for the Liberal agreement to keep the Labour Government in office, this increase in the petrol duty would have gone through. He must know that. By saying that the purpose of the Lib-Lab pact is not to keep the Labour Government in office but to keep the Conservatives out of Government, he is simply saying that he wishes to prevent the obvious wishes of the British electorate from being put into effect. He has in effect conceded that if the electorate were given a choice it would return a Conservative Government to power.

Mr. Ridley: I think the truth is that the hon. Member for Cornwall, North (Mr. Pardoe) believes that the Government are going through a certain amount of mid-term unpopularity, rather like Mr. Khrushchev in Russia.

Mr. Rifkind: I am grateful to my hon. Friend. It would appear that not only the Government but also the Liberal Party is going through a certain amount of mid-term unpopularity. In the case of the Liberal Party it has lasted since 1922. It looks like going on for another 50 years.
The hon. Member for Perth and East Perthshire (Mr. Crawford) argued that. although an alternative to the reduction in petrol duty might be required in the economy of England and Wales, it would not be required in the economy of an independent Scotland, because the massive revenues from North Sea oil as they would accrue to an independent Scotland would offset any losses that might occur as a result of a reduction in the petrol duty. The hon. Gentleman might have been slightly less modest and argued that the revenues from North Sea oil would allow an independent Scotland to abolish petrol duty altogether and

perhaps income tax, corporation tax and all the other taxes and imposts upon which the Government insist.
The simple fact is that the Scottish National Party has never quite been able to decide what function North Sea oil would have in the economy of an independent Scotland. At one time it was arguing that the revenues from North Sea oil would allow the pension of Scottish grannies to be doubled as soon as a nationalist government came to office. Then the hon. Lady the Member for Moray and Nairn (Mrs. Ewing) said that to get independence Scotland would be happy to give England and Wales all the oil. Since then there have been further variations of the argument. Notwithstanding the variations we hear in that proposal, the Government will either have to produce an alternative to account for the loss of revenue or give an extra fillip to the economy.
I should like to welcome one point that the Chief Secretary made. He said that the Government were not absolutely determined to stick by the date of 5th August. He did not regard it as a rock solid date for the implementation of the reduction in duty. The Chief Secretary and other hon. Members will know that the choice of 5th August, which is a Friday, is not regarded as particularly auspicious by many of those in the trade.
As we approach whatever date is chosen, many petrol stations will reduce their intake of new supplies in the hope that they can wait until the price has fallen and collect new supplies at the lower price. Equally, the public will try to wait until 6th August, or the day following whatever other date is chosen, to refill their tanks, knowing that they will then pay the lower price.
The effect will be that on the night of whatever day is fixed for the reduction to take effect, supplies of petrol at most stations will be at a minimum and on the following morning the demand from the public will be at a maximum.
As most suppliers to petrol stations do not supply at the weekend, there is a serious risk that severe problems will be created for the weekend beginning 5th August, which is likely to be a busy period as it is part of the holiday season in England and Wales.
I therefore hope that the Chief Secretary will consider an alternative day—a day in mid-week, or perhaps a Sunday evening—for the implementation of the change. Of course I hope that he will accept the Conservative amendment. Even if he does not find that possible, I hope that he will accept that 5th August, which is Friday, will create extra difficulties. I hope that he will be flexible.

Sir Raymond Gower: I am delighted with the attitude taken to the increase by those on the Conservative Front and Back Benches, by the members of the Liberal Party, by those on the Scottish National Bench, and also by certain Labour Members. In the past, members of all parties have been a little remiss about this tax. There has been a tendency to regard motoring as a luxury, as it possibly was in the years between the two great wars. Government Departments have come to realise only reluctantly how much a car is an essential in many parts of the country—and perhaps some of them have not done so yet. I hope that this augurs well for the future.
However, the Chief Secretary mentioned that the Government might return to this petrol tax. That was a regretable statement. I am sorry that the tax is to be removed purely as a result of the parliamentary situation. I should have liked to hear the Government come to the House to say "Yet, we suggested this tax but on reflection we realise that we were completely wrong". We have not heard that. The Government are simply saying that they must appraise the situation in the House. That suggests that at some time in the future, if the situation is different, a Labour Government might produce a similar impost. I certainly hope that it would not come from a Conservative Government.
The hon. Member for Birmingham, Ladywood (Mr. Walden) covered a fairly wide argument about taxation on this amendment. I do not blame him for that. Many of us could agree with his general theme, that it is desirable that we should not rely so much on high rates of direct taxation and that we should find a broader base of indirect taxation. He also pointed out that indirect taxtion would hurt in many cases and that, therefore, when considering such taxation the Government should also consider the

other side of the balance sheet. I agree with all that.
However, in seeking alternatives the Chief Secretary was definitely wrong to suppose that this tax is comparable to the other taxes that he mentioned, such as the duty on tobacco and alcohol. The increase in petrol duty cannot be compared with the duty on those items. I suspect that the Government chose this form of taxation because they thought that it would be less unpopular than an increase in tobacco or alcohol duty. Certainly they are not comparable forms of taxation, and that is certainly not a fair comparison in relation to the impact on some parts of the country where people are less able to bear this tax. I know that the hon. Member for Ladywood does not limit his views to his own constituency and appreciates that conditions are different in other parts of the country, but he does represent a metropolitan constituency and that must slant his viewpoint.
In Powys, in mid-Wales, the rate of ownership of motor cars is one of the highest in the country. The situation is probably the same throughout North Cornwall and also in some of the poorest counties in Wales. The people living in these areas do not have a lot of money to buy cars but they cannot live reasonably without them. If one increases the cost of running this essential service, the impact must necessarily be much harsher in mid-Wales, the Highlands of Scotland and parts of the country that already suffer from having fewer amenities and fewer of the things that are provided in the great cities. It must make life less possible in those parts where there has already been a tendency for people to leave the locality and to congregate in great cities.

Mr. Walden: I am sure that the hon. Gentleman can see that my point was that the real rôle of the House of Commons ought to be to persuade the Government to leave people more of their own money in their pockets rather than for hon. Members to try to claw back certain concessions on tax levied. The people the hon. Gentleman has just mentioned would be much better off as a result of a 10p cut in their income tax than as a result of anything else that we are doing today.

Sir R. Gower: I do not dissent from that view, but we are not at liberty, in the


amendment, to do that. We must consider the effect of the amendment. It is to the amendment that I am speaking and not about the wider taxation considerations to which the hon. Member has understandably referred. That does not deal with this point.
Had the amendment not been put down today the parts of the country that would have suffered worst would have been those where it would have been least easy for people to bear the increased tax. That must be considered by future Governments, and I hope that they will do so. That is why I deplore the tone of the Government's statement—that the amendment has been put down simply because of the parliamentary situation. It should have been put down on its merits. This should be a red light to future Governments that they must not take the easy way and soak motorists as Governments of both parties have done in the past.
The time has surely come when we as Back Benchers should say that this has gone far enough. Indeed the imposition of such a tax tremendously weakens our ability to object to oil price increases imposed by producer countries. How can we object to their proposals for increases if we ourselves are increasing taxes on petrol?
In conclusion, I am delighted that so many hon. Members are now taking this attitude. I hope that they will persist and that the Government Front Bench will be truly converted.

7.15 p.m.

Sir Geoffrey Howe: One is almost always impressed by points that are made by the hon. Member for Birmingham, Ladywood (Mr. Walden) when he takes part in such debates. Those of us who watched the sorry spectacle of the Government creeping from their original introduction of this legislation to the Chief Secretary—

Mr. Joel Barnett: Mr. Joel Barnett rose—

Sir G. Howe: The Chief Secretary must not be too sensitive, because I am about to sympathise with, and almost praise him. I was about to say, "the Chief Secretary creeping towards the denouement this afternoon"; and those who watched it must share the concern of the hon. Member for Ladywood about

this extraordinary system which, whatever else it does, succeeds in concealing from people outside the House and ourselves the link between the raising of taxes and the spending of money. However, it strikes one that we regard this method of government as sacrosanct and immune from change.
Undoubtedly the hon. Member for Ladywood was right to stress, as we have repeatedly stressed, that the burden of public expenditure in this country is much too high and that certainly the extent to which that burden is reflected in direct taxation on the earnings of working people is also too high. In so far as the Government have taken that argument on board, I am delighted. We find an inching towards the implementation of that policy in some of the measures in the Bill, but the machinery that is used, combined with the Government's incompetence, has made it impossible for the Government to select a strategy—if indeed they have a strategy—in that direction.
The matter is therefore being tossed backwards and forwards across the House and taxation is being imposed by Russian roulette with the hon. Member for Cornwall, North (Mr. Pardoe) having his finger on the trigger or whirling the barrel. That is not a good way of carrying through a change in taxation policy about which the majority of hon. Members are generally agreed.
The Government have pre-eminently selected the wrong mix to bring before the House. We are not asking for motorists and petrol prices to be exempted altogether from the burden of indirect taxation. That would be to go back a long way. Nor do we ask that they should be exempt from the burden of taxation in a general switch from direct to indirect taxation. However the Government have brought forward a package in which motorists have been selected as the special victims of the switch. My hon. Friends the Members for Tiverton (Mr. Maxwell-Hyslop) and for Bedford (Mr. Skeet) pointed out the extent to which this was so.
During the last three years VAT has come down in percentage terms of the cost of living—which has risen by about two-thirds—while the tax on petrol and car licences has doubled in that time. It


is not a matter of the Government justifying moving petrol and car taxation along with the cost of living. The Government have deliberately shifted it in that direction at the same time as abating their yield from VAT. The Government actually makes the position a great deal worse even from the point of view of arguing for higher taxes on motorists in order to treat more generously public transport and country buses.
As a result of their manoeuvres, the Government have ended with a reversion to the previous level of taxation on petrol and the motorist and a continuation of the additional 5 per cent. on derv which, even if it is not used by stage bus services, is used by school buses and many other forms of public transport. Having started with the wrong concentration on petrol and fuel oil, they have ended up with an even more wrong concentration, having helped the motorist in response to requests from all sides of the House but having maintained their determination to clobber rural school buses and the industrial user.
The Chief Secretary said on Second Reading that the Chancellor of the Exchequer had produced a carefully selected and carefully balanced package in vital areas of policy. There was marvellous prose describing the process of the Treasury and the minds of Ministers, but it has now been cast away. Even from the Government's standards, we have ended up with the wrong result.
I have considerable sympathy with my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and the hon. Member for Cornwall, North, who spoke about the curious ramshackle system of heaping subsidies on rural bus services with one hand while taxing other parts of their operation with the other being particularly disadvantageous.
Preventing citizens who want to transport each other around the place for modest reward from doing so serves no useful purpose to them and very little purpose for the people who have to run the rural buses. They have to negotiate with sometimes as many as 10 or 11 local authorities on such matters as concessionary fares. They call it part of their political revenue, but they might be better off without it. It is an extraordinary situation.
If we were a county council considering our budget, we could propose alternative taxes. We would have been considering the budget for six to nine months in committee and parties on both sides would be taking part. That is a supremely more rational approach to budget making than is our rather rambling way.
I see the right hon. Member for Battersea, North (Mr. Jay) sitting opposite, and his presence is a baleful warning that even the most select of Select Committees do not always arrive at clear-cut, unanimous conclusions. It may be an advantage to consider changing the present system. We have the wrong method, and it is not surprising that we end up with random and haphazard results. The Government are not playing the present system in accordance with the rules under which it is expected to be played. We cannot carry on with this haphazard system of taxes being brought piecemeal to the Floor of the House to be rejected or accepted.
The Chief Secretary comes down to us as if he were an air hostess with National Airlines bringing one tax package after another and saying "I'm Joel. Fly me." If we reject that, he will come back with a new package next week.
The Chief Secretary has not answered the question of my hon. Friend the Member for Cirencester and Tewkesbury about the consequences of this addition to the Budget deficit. It is only £140 million which, in modern parlance, is scarcely here nor there, but I fear that it is the beginning of an unleashing of the proper control of Government expenditure and the Budget plan that will be washed away in the sands of summer with all sorts of consequences. The Chief Secretary said that the Government would have to come back to this tax. Is he intending to introduce another increase in petrol duty? What does he mean by those rather menacing words?

Mr. Pardoe: Does the right hon. and learned Gentleman accept the argument of some of his hon. Friends that it would be a good thing to put the vehicle excise duty on to petrol? If so, that would mean a future Conservative Chancellor introducing very much higher taxes on petrol.

Sir G. Howe: This point was canvassed two years ago in the Finance Bill Committee. The Chancellor said that he had considered the option and the hon. Member for Cornwall, North himself reflected on the factors to be borne in mind. We should have to consider the balance of administrative convenience and the need to keep the burden off those who depend on road transport to travel to and from work. It is not a decision to be taken lightly, certainly not in the closing stages of a debate such as this. I should like the benefit of the views of a Committee of the whole House.
The measures before us are not the fruit of the Lib-Lab pact. If anything, they are the fruit of the Lib-Lab disagreement—the Lib-Lab misunderstanding. They are a desperate attempt by the Liberal Party to reassert their virginity at this late stage and to return for the time being to the Opposition Benches where one thought they belonged.
This camouflages the reality that within the system of government that has worked reasonably well up to now, this Government have lost their majority and cannot command support for the policies that they put before the House. They attempt to dignify what is happening as being halfway to the introduction of a European method of Budget making when it is nothing more than the Government's incapacity to command a majority here and a concealment of the total craven reluctance of the Government or the Liberals to place themselves before the judgment of the electorate.
Our manuscript amendment would remove the duty not just from petrol, but from derv and other motor fuels. I am delighted to have the support of the Scottish National Party for it and I hope to have the support of the whole House.
I beg to move, as a manuscript amendment to the Government amendment, to leave out from first 'shall' to the end and insert:
'be at the rate of 0·3000 a gallon'.

Mr. Joel Barnett: We have had an interesting debate. My hon. Friend the Member for Birmingham, Ladywood (Mr. Walden) made an interesting speech, as always, but it was particularly interesting on this occasion because he said that he loved us all. He thought that the Government Front Bench were doing a

marvellous job, the Opposition Front Bench were very good, the Liberals were very good—everybody was very good. He loves us all. I was grateful for that favour even though my hon. Friend felt it necessary to go to talk about his deep suspicions of the Treasury and the Inland Revenue.
My hon. Friend the Member for Tottenham (Mr. Atkinson) and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) were worried about the way that we deal with tax matters on the Floor of the House and in Committee because there is no opportunity for anyone other than the Government to deal with alternatives when seeking to reduce a particular tax. I have some sympathy with that view.
As always, my hon. Friend the Member for Ladywood was honest in his contribution. He supports a switch to indirect taxes and, unlike the right hon. and learned Member for Surrey, East (Sir G. Howe), he is not selective in his support. He supported the need to increase indirect taxes and was therefore in favour of increases in the petrol duty.
I shall come back to the points raised by the right hon. and learned Member for Surrey, East in his winding-up speech. He made some remarks that will not endear him to his hon. Friends who spoke about not only never increasing this tax but actually reducing it. The right hon. and learned Member for Surrey, East said something quite different this evening. In his opening remarks he referred to his amendment relating to the date of 31st May, and asked why it was not possible to allow that date without incurring administrative problems.
7.30 p.m.
I sought to deal with that point in opening. The only way in which that can be done is to move a Budget Resolution before an amendment is carried. By Section 1(4) of the Collection of Taxes Act a resolution is required to precede amendment of a Bill. It cannot be validated by a resolution ex post facto. That is the reason why the date of 31st May 1977 in the amendment would cause serious problems. We should have to wait. The power of the Budget Resolution would still exist to collect the 5p right up to Royal Assent, and then repayment would have to be made. That


would create enormous problems, and the benefit would not go to the motorist—and it is quite clear from the debate that everybody wants to help the motorist.
Referring to the love for everybody displayed by my hon. Friend the Member for Ladywood, I hope that nobody will pretend that he or she loves the motorist any better than does anybody else. I am very fond of motorists, since I am one myself. Indeed, I am fond of all kinds of people. I am even fond of people with whom I do not necessarily agree. Therefore, I hope that nobody will seek to degrade the level of debate by pretending that he is fonder of the motorist than is anybody else.

Mr. Lawson: Since I am a little worried about the Chief Secretary being concerned about anybody degrading the level of debate, perhaps I may intervene in an effort to try to raise that level. Does the right hon. Gentleman admit that if the amendment related to the date of 31st May were to be accepted by the Committee, the Government could decline to collect the extra revenue subsequent to that date? Therefore, there will be nothing to refund and there will be no administrative problem.

Mr. Barnett: The hon. Gentleman always tries to raise the level of debate. Perhaps I should have included him among some of the people of whom I am fond, but I am sure the hon. Gentleman knows how fond I am of him. If the hon. Gentleman thinks about the matter a little more deeply, he will realise that the Budget Resolution would take precedence and we would be legally obliged to accept the tax. [HON. MEMBERS: "Oh".] That is a fact. We would be legally obliged to collect it. [Interruption.] It is true that we need not to do so, but do Opposition Members not appreciate the chaos that would ensue? We could be taken to court for not collecting the tax that we were legally obliged to take. [Interruption.] I assure the Opposition that there are characters around who would take us to court, and enormous uncertainty would be created.
I was not merely resting my case on the time element, although there is a powerful administrative argument; I was basing it on the question of cost. The Committee should be aware that an extra £30 million would be incurred in

borrowing requirement—a not unimportant figure.
The right hon. and learned Gentleman and a number of his hon. Friends made an interesting case to the effect that we needed to reduce the amount of expenditure on public transport in rural areas. In other words, they were suggesting that we should not force people to use public transport but should help them to run their private cars. That was very different from the argument deployed by the Shadow Minister of Transport in the debate on transport on 2nd May. The hon. Gentleman then quoted the General Election of 1974 and said that the Labour Party wanted to develop public transport to make us less dependent on the private car. He suggested that whatever else one may disagree on, there was no disagreement on that.
That is very different from what the right hon. and learned Member for Surrey, East said in today's debate. The impression given today was that the Opposition want to reduce the amount of money spent on public transport.

Sir Raymond Gower: No.

Mr. Barnett: No doubt the hon. Member for Barry (Sir R. Gower) will be able to turn up that debate a little later.
I come to the main burden, if that is what it was, of the right hon. and learned Gentleman's argument—namely, to the alternative of VAT. I asked him a straight question at the opening of the debate. I asked whether, given his view as to the need to switch from direct to indirect taxes, he would never increase petrol tax, and the right hon. and learned Gentleman did not answer. In his concluding remarks he used a different phrase. He said that he would not exempt petrol from taxes, for the very good reason that if one were to switch to indirect taxes one would have to be selective and petrol tax would decline as a proportion of total taxes raised. The right hon. and learned Gentleman was honest enough to accept that result. But he is also arguing that it should happen not this year but another year. In that way he would not be hurting the rural motorist or those struggling to run a car. That was strange for the right hon. and learned Gentleman to advance.
It was pointed out by the hon. Member for Cornwall, North (Mr. Pardoe) that a


number of Opposition Members wish to see the abolition of vehicle excise duty and wanted to add that cost to the price of petrol in a petrol tax. The Committee must be aware that there is a cost in taking that course. It would mean an addition of 18½p to the price of petrol. But when the hon. Member for Cornwall, North asked the right hon. and learned Gentleman for his view he replied "Well we should not take these decisions lightly." But he has taken a decision lightly, to be thoroughly irresponsible on the subject of a 5p petrol tax.

Mr. Ridley: Does the Chief Secretary think that the petrol tax should be put up and motor tax abolished? Will he give the Committee a straight answer?

Mr. Barnett: We are now considering this matter—[HON. MEMBERS: "Oh."] My right hon. Friend the Chancellor of the Exchequer has already said that. If I may seek to answer the hon. Gentleman I do not think that at this moment we should do that, in view of the many problems faced by small car manufacturers in this country. There are other good reasons, too. I am not in favour of taking that step now, but that was not the view of the right hon. and learned Gentleman.
Many fears were expressed, in the debate and elsewhere, about the possibility of garages running out of stocks of petrol on a particular date. A date of 5th August was mentioned, and the hon. Member for Cornwall, North referred to the problems relating to that date, because it fell on a Friday which, according to the hon. Gentleman, could cause difficulties. We set the date at 5th August because we wanted a specific date. But I said earlier, and I repeat now, that we shall be having discussions with the trading organisations with a view to seeing whether there is a more convenient date round about that time which would be more helpful to the trade generally. I cannot go further than that.

Sir Geoffrey Howe: Will the right hon. Gentleman now be kind enough to answer my question? What does he mean when he speaks about the Government's future intentions? Do they intend, if they last that long, to reintroduce these proposals to increase the tax on petrol? The right hon. Gentleman spoke in menacing

words about that in his earlier remarks, and I should like to know where the Government stand.

Mr. Barnett: When do I ever sound menacing? I am not that kind of fellow, as the right hon. and learned Gentleman knows. I hope that I put the matter fairly. What I said—I think that the right hon. and learned Gentleman recognises it himself—was that if we do not come back, as a Parliament, to increase the petrol tax, it will decline as a proportion of total taxation, and I hope that none of us is in favour of that. When I say that we shall have to come back to it, that is precisely what I mean. All of us would need to come back to the question of increasing the petrol tax, and I am glad to see that the right hon. and learned Gentleman does not disagree, in contrast to the views expressed by some of his hon. Friends.
In my opening speech I said that I should have preferred to keep the 5p tax. Indeed, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind) took me to task about it, saying that he could not understand why, having convinced him of the argument—

Mr. Rifkind: Almost.

Mr. Barnett: —I said that I accepted that there was a majority in the House against it. The hon. Member for Pent-lands spelled it out. The truth is that even though I have almost convinced him, both he and many of his hon. Friends who know that the 5p increase was right would nevertheless have voted as they did on the Budget Resolution. They know that they would.

Sir Raymond Gower: Sir Raymond Gower rose—

Mr. Barnett: No, I shall not give way. The House wants to come to a conclusion. I accepted the decision of the House, knowing the irresponsibility of the official Opposition. That is the reason.

Mr. Rifkind: If the Chief Secretary believes that anyone who voted for the reduction in the proposed petrol tax would be guilty of irresponsibility, would it not be more sensible if he himself did not intend to vote for his own amendment in a few minutes?

Mr. Barnett: I know that the hon. Gentleman listened carefully and courteously to what I said earlier. I said


that I should have preferred to keep the 5p. I made no bones about it. But I recognise that there is a majority in the House against it, so I have moved an amendment that will at least be considerably cheaper than losing the whole of the clause. The cost of the amendment is £140 million, in public sector borrowing requirement terms in 1977–78. The cost of losing the whole clause, for which the hon. Gentleman and his hon. Friends voted on the Budget Resolution, would be £365 million. That is why I am suggesting that the Committee should vote as I propose. There is no other

reason. I do not go back on what I said. I believe that it was right, but obviously the House is not in favour of it.

I hope, therefore, that the Committee will accept our amendment, not because I believe that it was right to make the reduction but because it is cheaper than the alternative suggested by the Opposition.

Question put, That the amendment to the proposed amendment be made:—

The Committee divided: Ayes 250, Noes 271.

Division No. 123]
AYES
[7.44 p.m.


Adley, Robert
Fisher, Sir Nigel
Knox, David


Aitken, Jonathan
Fletcher, Alex (Edinburgh N)
Lamont, Norman


Alison, Michael
Fookes, Miss Janet
Latham, Michael (Melton)


Amery, Rt Hon Julian
Forman, Nigel
Lawrence, Ivan


Arnold, Tom
Fowler, Norman (Sutton C'f'd)
Lawson, Nigel


Atkins, Rt Hon H. (Spelthorne)
Fox, Marcus
Lester, Jim (Beeston)


Awdry, Daniel
Fraser, Rt Hon H. (Stafford &amp; St)
Lewis, Kenneth (Rutland)


Bain, Mrs Margaret
Fry, Peter
Lloyd, Ian


Baker, Kenneth
Galbraith, Hon T. G. D.
Loveridge, John


Bell, Ronald
Gardiner, George (Reigate)
Luce, Richard


Benyon, W.
Gardner, Edward (S Fylde)
MacCormick, Iain


Berry, Hon Anthony
Gilmour, Rt Hon Sir Ian (Chesham)
McCrindle, Robert


Biggs-Davison, John
Gilmour, Sir John (East Fife)
Macfarlane, Neil


Blaker, Peter
Glyn, Dr Alan
MacGregor, John


Body, Richard
Godber, Rt Hon Joseph
MacKay, Andrew (Stechford)


Boscawen, Hon Robert
Goodhart, Philip
Macmillan, Rt Hon M. (Farnham)


Bottomley, Peter
Goodhew, Victor
McNair-Wilson, M. (Newbury)


Bowden, A. (Brighton, Kemptown)
Goodlad, Alastair
McNair-Wilson, P. (New Forest)


Boyson, Dr Rhodes (Brent)
Gorst, John
Madel, David


Braine, Sir Bernard
Gow, Ian (Eastbourne)
Marshall, Michael (Arundel)


Brittan, Leon
Gower, Sir Raymond (Barry)
Marten, Neil


Brocklebank-Fowler, C.
Gray, Hamish
Mates, Michael


Brooke, Peter
Griffiths, Eldon
Mather, Carol


Brotherton, Michael
Grist, Ian
Maude, Angus


Bryan, Sir Paul
Grylls, Michael
Maudling, Rt Hon Reginald


Buchanan-Smith, Alick
Hall, Sir John
Mawby, Ray


Buck, Antony
Hall-Davis, A. G. F.
Maxwell-Hyslop, Robin


Budgen, Nick
Hamilton, Michael (Salisbury)
Mayhew, Patrick


Bulmer, Esmond
Hampson, Dr Keith
Meyer, Sir Anthony


Burden, F. A.
Hannam, John
Miller, Hal (Bromsgrove)


Butler, Adam (Bosworth)
Harrison, Col Sir Harwood (Eye)
Mills, Peter


Carlisle, Mark
Harvie Anderson, Rt Hon Miss
Miscampbell, Norman


Chalker, Mrs Lynda
Hastings, Stephen
Mitchell, David (Basingstoke)


Clark, Alan (Plymouth, Sutton)
Havers, Sir Michael
Moate, Roger


Clark, William (Croydon S)
Hawkins, Paul
Monro, Hector


Clarke, Kenneth (Rushcliffe)
Hayhoe, Barney
Montgomery, Fergus


Clegg, Walter
Henderson, Douglas
Moore, John (Croydon C)


Cockcroft, John
Hicks, Robert
More, Jasper (Ludlow)


Cope, John
Higgins, Terence L.
Morgan, Geraint


Cormack, Patrick
Hodgson, Robin
Morgan-Giles, Rear-Admiral


Costain, A. P.
Holland, Philip
Morris, Michael (Northampton S)


Crawford, Douglas
Hordern, Peter
Morrison, Charles (Devizes)


Crouch, David
Howe, Rt Hon Sir Geoffrey
Morrison, Hon Peter (Chester)


Crowder, F. P.
Howell, David (Guildford)
Mudd, David


Davies, Rt Hon J. (Knutsford)
Hunt, David (Wirral)
Neave, Airey


Dean, Paul (N Somerset)
Hunt, John (Bromley)
Nelson, Anthony


Dodsworth, Geoffrey
Hurd, Douglas
Neubert, Michael


Douglas-Hamilton, Lord James
Hutchison, Michael Clark
Newton, Tony


Drayson, Burnaby
Irving, Charles (Cheltenham)
Nott, John


du Cann, Rt Hon Edward
James, David
Onslow, Cranley


Durant, Tony
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Oppenheim, Mrs Sally


Dykes, Hugh
Johnson Smith, G. (E Grinstead)
Page, Rt Hon R. Graham (Crosby)


Eden, Rt Hon Sir John
Jones, Arthur (Daventry)
Page, Richard (Workington)


Edwards, Nicholas (Pembroke)
Jopling, Michael
Parkinson, Cecil


Elliott, Sir William
Joseph, Rt Hon Sir Keith
Pattie, Geoffrey


Emery, Peter
Kaberry, Sir Donald
Percival, Ian


Evans, Gwynfor (Carmarthen)
Kershaw, Anthony
Peyton, Rt Hon John


Eyre, Reginald
Kimball, Marcus
Price, David (Eastleigh)


Fairbairn, Nicholas
King, Evelyn (South Dorset)
Prior, Rt Hon James


Fairgrieve, Russell
King, Tom (Bridgwater)
Pym, Rt Hon Francis


Fell, Anthony
Kitson, Sir Timothy
Rathbone, Tim


Finsberg, Geoffrey
Knight, Mrs Jill
Rawlinson, Rt Hon Sir Peter




Rees, Peter (Dover &amp; Deal)
Speed, Keith
Vaughan, Dr Gerald


Rees-Davies, W. R.
Spence, John
Viggers, Peter


Renton, Rt Hon Sir D. (Hunts)
Spicer, Michael (S Worcester)
Wakeham, John


Renton, Tim (Mid-Sussex)
Sproat, Iain
Walder, David (Clitheroe)


Rhodes James, R.
Stainton, Keith
Wall, Patrick


Ridley, Hon Nicholas
Stanbrook, Ivor
Walters, Dennis


Ridsdale, Julian
Stanley, John
Watt, Hamish


Rifkind, Malcolm
Steen, Anthony (Wavertree)
Weatherill, Bernard


Roberts, Wyn (Conway)
Stewart, Rt Hon Donald
Wells, John


Rossi, Hugh (Hornsey)
Stewart, Ian (Hitchin)
Welsh, Andrew


Rost, Peter (SE Derbyshire)
Stokes, John
Whitelaw, Rt Hon William


Royle, Sir Anthony
Stradling Thomas, J.
Wiggin, Jerry


Sainsbury, Tim
Tapsell, Peter
Wigley, Dafydd


St. John-Stevas, Norman
Taylor, R. (Croydon NW)
Wilson, Gordon (Dundee E)


Shaw, Giles (Pudsey)
Taylor, Teddy (Cathcart)
Winterton, Nicholas


Shelton, William (Streatham)
Tebbit, Norman
Wood, Rt Hon Richard


Shepherd, Colin
Temple-Morris, Peter
Young, Sir G. (Ealing, Acton)


Shersby, Michael
Thatcher, Rt Hon Margaret
Younger, Hon George


Silvester, Fred
Thomas, Rt Hon P. (Hendon S)



Sims, Roger
Thompson, George



Skeet, T. H. H.
Townsend, Cyril D.
TELLERS FOR THE AYES:


Smith, Dudley (Warwick)
Trotter, Neville
Mr. Spencer Le Marchant and


Smith, Timothy John (Ashfield)
van Straubenzee, W. R.
Mr. Michael Roberts.




NOES


Abse, Leo
Doig, Peter
Jenkins, Hugh (Putney)


Allaun, Frank
Douglas-Mann, Bruce
John, Brynmor


Archer, Peter
Duffy, A. E. P.
Johnson, James (Hull West)


Armstrong, Ernest
Dunnett, Jack
Johnson, Walter (Derby S)


Ashley, Jack
Eadie, Alex
Johnston, Russell (Inverness)


Ashton, Joe
Edge, Geoff
Jones, Alec (Rhondda)


Atkins, Ronald (Preston N)
Ellis, John (Brigg &amp; Scun)
Jones, Barry (East Flint)


Atkinson, Norman
English, Michael
Jones, Dan (Burnley)


Barnett, Guy (Greenwich)
Ennals, David
Judd, Frank


Barnett, Rt Hon Joel (Heywood)
Evans, Fred (Caerphilly)
Kaufman, Gerald


Bates, Alf
Evans, Ioan (Aberdare)
Kelley, Richard


Bean, R. E.
Ewing, Harry (Stirling)
Kerr, Russell


Beith, A. J.
Faulds, Andrew
Kilroy-Silk, Robert


Benn, Rt Hon Anthony Wedgwood
Fitch, Alan (Wigan)
Kinnock, Neil


Bennett, Andrew (Stockport N)
Flannery, Martin
Lambie, David


Bidwell, Sydney
Fletcher, Ted (Darlington)
Lamborn, Harry


Bishop, E. S.
Foot, Rt Hon Michael
Lamond, James


Blenkinsop, Arthur
Ford, Ben
Latham, Arthur (Paddington)


Boardman, H.
Fowler, Gerald (The Wrekin)
Leadbitter, Ted


Booth, Rt Hon Albert
Fraser, John (Lambeth, N'w'd)
Lee, John


Boothroyd, Miss Betty
Freeson, Reginald
Lestor, Miss Joan (Eton and Slough)


Bottomley, Rt Hon Arthur
Freud, Clement
Lever, Rt Hon Harold


Bradley, Tom
Garrett, John (Norwich S)
Lewis, Ron (Carlisle)


Brown, Hugh D. (Provan)
Garrett, W. E. (Wallsend)
Lipton, Marcus


Brown, Robert C. (Newcastle W)
George, Bruce
Lomas, Kenneth


Buchan, Norman
Gilbert, Dr John
Loyden, Eddie


Buchanan, Richard
Ginsburg, David
Luard, Evan


Callaghan, Rt Hon J. (Cardiff SE)
Golding, John
Lyon, Alexander (York)


Callaghan, Jim (Middlelon &amp; P)
Gould, Bryan
Lyons, Edward (Bradford W)


Campbell, Ian
Gourlay, Harry
McCartney, Hugh


Canavan, Dennis
Graham, Ted
McDonald, Dr Oonagh


Cant, R. B.
Grant, George (Morpeth)
McElhone, Frank


Carmichael, Neil
Grimond, Rt Hon J.
MacFarquhar, Roderick


Carter, Ray
Grocott, Bruce
Mackenzie, Gregor


Carter-Jones, Lewis
Hamilton, James (Bothwell)
McMillan, Tom (Glasgow C)


Cartwright, John
Harrison, Walter (Wakefield)
Madden, Max


Castle, Rt Hon Barbara
Hart, Rt Hon Judith
Magee, Bryan


Clemitson, Ivor
Hattersley, Rt Hon Roy
Mahon, Simon


Cocks, Rt Hon Michael
Hatton, Frank
Mallalieu, J. P. W.


Cohen, Stanley
Hayman, Mrs Helene
Marks, Kenneth


Coleman, Donald
Healey, Rt Hon Denis
Marshall, Dr Edmund (Goole)


Colquhoun, Ms Maureen
Heffer, Eric S.
Marshall, Jim (Leicester S)


Conlan, Bernard
Hooley, Frank
Maynard, Miss Joan


Cook, Robin F. (Edin C)
Hooson, Emlyn
Meacher, Michael


Corbett, Robin
Horam, John
Mellish, Rt Hon Robert


Cowans, Harry
Howell, Rt Hon Denis (B'ham, Sm H)
Mikardo, Ian


Cox, Thomas (Tooting)
Howells, Geraint (Cardigan)
Millan, Rt Hon Bruce


Crawshaw, Richard
Hoyle, Doug (Nelson)
Miller, Dr M. S. (E Kilbride)


Crowther, Stan (Rotherham)
Huckfield, Les
Miller, Mrs Millie (Ilford N)


Cryer, Bob
Hughes, Rt Hon C. (Anglesey)
Mitchell, Austin Vernon (Grimsby)


Cunningham, G. (Islington S)
Hughes, Robert (Aberdeen N)
Molloy, William


Cunningham, Dr J. (Whiteh)
Hughes, Roy (Newport)
Moonman, Eric


Davidson, Arthur
Hunter, Adam
Morris, Alfred (Wythenshawe)


Davies, Bryan (Enfield N)
Irvine, Rt Hon Sir A. (Edge Hill)
Morris, Charles R. (Openshaw)


Davies, Denzil (Llanelli)
Irving, Rt Hon S. (Dartford)
Morris, Rt Hon J. (Aberavon)


Davies, Ifor (Gower)
Jackson, Colin (Brighouse)
Moyle, Roland


Davis, Clinton (Hackney C)
Jackson, Miss Margaret (Lincoln)
Murray, Rt Hon Ronald King


Deakins, Eric
Janner, Greville
Noble, Mike


Dean, Joseph (Leeds West)
Jay, Rt Hon Douglas
Oakes, Gordon


Dempsey, James
Jeger, Mrs Lena
Ogden, Eric







O'Halloran, Michael
Sedgemore, Brian
Tuck, Raphael


Orbach, Maurice
Selby, Harry
Varley, Rt Hon Eric G.


Orme, Rt Hon Stanley
Shaw, Arnold (Ilford South)
Wainwright, Edwin (Dearne V)


Ovenden, John
Sheldon, Rt Hon Robert
Walden, Brian (B'ham, L'dyw'd)


Owen, Rt Hon Dr David
Shore, Rt Hon Peter
Walker, Harold (Doncaster)


Padley, Walter
Short, Mrs Renee (Wolv NE)
Walker, Terry (Kingswood)


Palmer, Arthur
Silkin, Rt Hon S. C. (Dulwich)
Ward, Michael


Pardoe, John
Sillars, James
Watkins, David


Park, George
Silverman, Julius
Weetch, Ken


Parry, Robert
Skinner, Dennis
Weitzman, David


Pavitt, Laurie
Small, William
Wellbeloved, James


Pendry, Tom
Smith, John (N Lanarkshire)
White, Frank R. (Bury)


Penhaligon, David
Snape, Peter
White, James (Pollok)


Parry, Ernest
Spearing, Nigel
Whitlock, William


Prentice, Rt Hon Reg
Spriggs, Leslie
Willey, Rt Hon Frederick


Price, William (Rugby)
Stallard, A. W.
Williams, Rt Hon Alan (Swansea W)


Radice, Giles
Stewart, Rt Hon M. (Fulham)
Williams, Alan Lee (Hornch'ch)


Rees, Rt Hon Merlyn (Leeds S)
Stott, Roger
Williams, Rt Hon Shirley (Hertford)


Richardson, Miss Jo
Strang, Gavin
Williams, Sir Thomas (Warrington)


Roberts, Albert (Normanton)
Strauss, Rt Hon G. R.
Wilson, Alexander (Hamilton)


Roberts, Gwilym (Cannock)
Summerskill, Hon Dr Shirley
Wilson, Rt Hon Sir Harold (Huyton)


Robinson, Geoffrey
Swain, Thomas
Wilson, William (Coventry SE)


Roderick, Caerwyn
Taylor, Mrs Ann (Bolton W)
Wise, Mrs Audrey


Rodgers, George (Chorley)
Thomas, Jeffrey (Abertillery)
Woodall, Alec


Rodgers, Rt Hon William (Stockton)
Thomas, Mike (Newcastle E)
Woof, Robert


Rooker, J. W.
Thomas, Ron (Bristol NW)
Wrigglesworth, Ian


Rose, Paul B.
Thome, Stan (Preston South)
Young, David (Bolton E)


Ross, Stephen (Isle of Wight)
Thorpe, Rt Hon Jeremy (N Devon)



Ross, Rt Hon W. (Kilmarnock)
Tierney, Sydney
TELLERS FOR THE NOES:


Rowlands, Ted
Tinn, James
Mr. David Stoddart and


Ryman, John
Tomlinson, John
Mr. Joseph Harper.


Sandelson, Neville
Torney, Tom

Question accordingly negatived.

Amendment agreed to.

Sir Geoffrey Howe: I beg to move Amendment No. 5, in clause 4, page 5, line 4, leave out subsection (2).

The Second Deputy Chairman (Mr. Bryant Godman Irvine): With this we may take Amendments Nos. 6 and 7. We may also take Amendment No. 8, in page 5, line 26, leave out subsection (4).

Sir G. Howe: I intend, if I may, to speak to this group of amendments shortly and, indeed, almost formally. The House has just voted on the amendment in which we sought to lighten duty on derv or heavy oil used for road transport purposes, in the same way as the Government are lightening the duty on petrol, and the Government have persuaded the House to reject that. Even so, we now contend that the imposition of a higher duty on the small number of non-road transport oil products affected by the remainder of the clause would be quite wrong and quite damaging.
Subsection (2) proposes to increase the duty on industrial fuel, and subsection (4) proposes to increase the duty on commercial fuel, and in each case to increase it by 150 per cent. from 1 p to 2—p per gallon. In our view, that is too large an increase and ought not to be allowed to stand now that the increase on petrol is being withdrawn by the Government.
We believe that it is unfair to bring forward such a large increase on commercial and industrial users and on those who use oil for central heating and that the additionl tax revenue which would be lost by eliminating those increases would be more than made up by increasing value added tax, as we have argued throughout, to the standard rate of 10 per cent., which the Government ought to have done in the first place.
We propose to vote for the deletion of this tax increase in subsection (2) and for the deletion of it in subsection (4). I shall be inviting my right hon. and hon. Friends to vote in support of Amendments Nos. 6 and 7 to fulfil those propositions.

8 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): The right hon. and learned Member for Surrey, East (Sir G. Howe) wants the proposed increases in the oil duty for non-road fuels to be deleted. That we cannot accept. This is the first increase in oil duties since 1969. All we are doing is revalorising. We have given the concession that was debated at length previously. We feel that the argument for a change in this aspect of increases in oil duties is not made out. The increase in the retail price index can readily be understood by those concerned. Because of arguments adduced generally for the increased petrol duty, we believe that these amendments should be resisted.

Amendment negatived.

Amendment proposed: No. 6, in page 5, line 13, at end insert:
'as respects the period ending at midnight on 31st May 1977; and thereafter of 1 p a gallon

less than the rate at which the duty is for the time being chargeable'.—[Sir G. Howe.]

Question put, That the amendment be made:—

The Committee divided: Ayes 250, Noes 268.

Division No. 124]
AYES
[8.03 p.m.


Adley, Robert
Gilmour, Rt Hon Ian (Chesham)
Maudling, Rt Hon Reginald


Aitken, Jonathan
Gilmour, Sir John (East Fife)
Mawby, Ray


Alison, Michael
Glyn, Dr Alan
Maxwell-Hyslop, Robin


Amery, Fit Hon Julian
Godber, Rt Hon Joseph
Mayhew, Patrick


Arnold, Tom
Goodhart, Philip
Meyer, Sir Anthony


Atkins, Rt Hon H. (Spelthorne)
Goodhew, Victor
Miller, Hal (Bromsgrove)


Awdry, Daniel
Goodlad, Alastair
Mills, Peter


Bain, Mrs Margaret
Gorst, John
Miscampbell, Norman


Baker, Kenneth
Gow, Ian (Eastbourne)
Mitchell, David (Basingstoke)


Bell, Ronald
Gower, Sir Raymond (Barry)
Moate, Roger


Benyon, W.
Gray, Hamish
Monro, Hector


Berry, Hon Anthony
Griffiths, Eldon
Montgomery, Fergus


Biggs-Davison, John
Grist, Ian
Moore, John (Croydon C)


Blaker, Peter
Grylls, Michael
More, Jasper (Ludlow)


Body, Richard
Hall, Sir John
Morgan, Geraint


Boscawen, Hon Robert
Hall-Davis, A. G. F.
Morgan-Giles, Rear-Admiral


Bottomley, Peter
Hamilton, Michael (Salisbury)
Morris, Michael (Northampton S)


Bowden, A. (Brighton, Kemptown)
Hampson, Dr Keith
Morrison, Charles (Devizes)


Boyson, Dr Rhodes (Brent)
Hannam, John
Mudd, David


Braine, Sir Bernard
Harrison, Col Sir Harwood (Eye)
Neave, Airey


Brittan, Leon
Harvie Anderson, Rt Hon Miss
Nelson, Anthony


Brocklebank-Fowler, C.
Hastings, Stephen
Neubert, Michael


Brooke, Peter
Havers, Sir Michael
Newton, Tony


Brotherton, Michael
Hawkins, Paul
Nott, John


Bryan, Sir Paul
Hayhoe, Barney
Onslow, Cranley


Buchanan-Smith, Alick
Henderson, Douglas
Oppenheim, Mrs Sally


Buck, Antony
Hicks, Robert
Page, Rt Hon R. Graham (Crosby)


Budgen, Nick
Higgins, Terence L.
Page, Richard (Workington)


Bulmer, Esmond
Hodgson, Robin
Parkinson, Cecil


Burden, F. A.
Holland, Philip
Pattie, Geoffrey


Butler, Adam (Bosworth)
Hordern, Peter
Percival, Ian


Carlisle, Mark
Howe, Rt Hon Sir Geoffrey
Peyton, Rt Hon John


Chalker, Mrs Lynda
Howell, David (Guildford)
Price, David (Eastleigh)


Churchill, W. S.
Hunt, David (Wirral)
Prior, Rt Hon James


Clark, Alan (Plymouth, Sutton)
Hunt, John (Bromley)
Pym, Rt Hon Francis


Clark, William (Croydon S)
Hurd, Douglas
Rathbone, Tim


Clarke, Kenneth (Rushcliffe)
Hutchison, Michael Clark
Rawlinson, Rt Hon Sir Peter


Clegg, Walter
Irving, Charles (Cheltenham)
Rees, Peter (Dover &amp; Deal)


Cockcroft, John
James, David
Rees-Davies, W. R.


Cope, John
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Renton, Rt Hon Sir D. (Hunts)


Cormack, Patrick
Johnson Smith, G. (E Grinstead)
Renton, Tim (Mid-Sussex)


Costain, A. P.
Jones, Arthur (Daventry)
Rhodes James, R.


Crawford, Douglas
Jopling, Michael
Ridley, Hon Nicholas


Crouch, David
Joseph, Rt Hon Sir Keith
Ridsdale, Julian


Crowder, F. P.
Kershaw, Anthony
Rifkind, Malcolm


Davies, Rt Hon J. (Knutsford)
Kimball, Marcus
Roberts, Michael (Cardiff NW)


Dean, Paul (N Somerset)
King, Evelyn (South Dorset)
Roberts, Wyn (Conway)


Dodsworth, Geoffrey
King, Tom (Bridgwater)
Rossi, Hugh (Hornsey)


Douglas-Hamilton, Lord James
Kitson, Sir Timothy
Rost, Peter (SE Derbyshire)


Drayson, Burnaby
Knight, Mrs Jill
Royle, Sir Anthony


du Cann, Rt Hon Edward
Knox, David
Sainsbury, Tim


Durant, Tony
Lamont, Norman
St. John-Stevas, Norman


Dykes, Hugh
Latham, Michael (Melton)
Shaw, Giles (Pudsey)


Eden, Rt Hon Sir John
Lawrence, Ivan
Shelton, William (Streatham)


Edwards, Nicholas (Pembroke)
Lawson, Nigel
Shepherd, Colin


Elliott, Sir William
Le Marchant, Spencer
Shersby, Michael


Emery, Peter
Lester, Jim (Beeston)
Silvester, Fred


Evans, Gwynfor (Carmarthen)
Lewis, Kenneth (Rutland)
Sims, Roger


Eyre, Reginald
Lloyd, Ian
Skeet, T. H. H.


Fairbairn, Nicholas
Loveridge, John
Smith, Dudley (Warwick)


Fairgrieve, Russell
Luce, Richard
Smith, Timothy John (Ashfield)


Fell, Anthony
MacCormick, Iain
Speed, Keith


Finsberg, Geoffrey
McCrindle, Robert
Spence, John


Fisher, Sir Nigel
Macfarlane, Neil
Spicer, Michael (S Worcester)


Fletcher, Alex (Edinburgh N)
MacGregor, John
Sproat, Iain


Fookes, Miss Janet
Mackay, Andrew James
Stainton, Keith


Forman, Nigel
Macmillan, Rt Hon M. (Farnham)
Stanbrook, Ivor


Fowler, Norman (Sutton C'f'd)
McNair-Wilson, M. (Newbury)
Stanley, John


Fox, Marcus
McNair-Wilson, P. (New Forest)
Steen, Anthony (Wavertree)


Fraser, Rt Hon H. (Stafford &amp; St)
Madel, David
Stewart, Rt Hon Donald


Fry, Peter
Marshall, Michael (Arundel)
Stewart, Ian (Hitchin)


Galbraith, Hon T. G. D.
Marten, Neil
Stokes, John


Gardiner, George (Reigate)
Mates, Michael
Stradling Thomas, J.


Gardner, Edward (S Fylde)
Maude, Angus
Tapsell, Peter




Taylor, R. (Croydon NW)
Viggers, Peter
Wigley, Dafydd


Taylor, Teddy (Cathcart)
Wakeham, John
Wilson, Gordon (Dundee E)


Tebbit, Norman
Walder, David (Clitheroe)
Winterton, Nicholas


Temple-Morris, Peter
Wall, Patrick
Wood, Rt Hon Richard


Thatcher, Rt Hon Margaret
Walters, Dennis
Young, Sir G. (Ealing, Acton)


Thomas, Rt Hon P. (Hendon S)
Watt, Hamish
Younger, Hon George


Thompson, George
Weatherill, Bernard



Townsend, Cyril D.
Wells, John
TELLERS FOR THE AYES:


Trotter, Neville
Welsh, Andrew
Mr. Peter Morrison and


van Straubenzee, W. R.
Whitelaw, Rt Hon William
Mr. Carol Mather.


Vaughan, Dr Gerard
Wiggin, Jerry





NOES


Abse, Leo
Faulds, Andrew
Lyon, Alexander (York)


Allaun, Frank
Fitch, Alan (Wigan)
Lyons, Edward (Bradford W)


Archer, Peter
Flannery, Martin
McCartney, Hugh


Armstrong, Ernest
Fletcher, Ted (Darlington)
McDonald, Dr Oonagh


Ashley, Jack
Foot, Rt Hon Michael
McElhone, Frank


Ashton, Joe
Ford, Ben
MacFarquhar, Roderick


Atkins, Ronald (Preston N)
Fowler, Gerald (The Wrekin)
MacKenzie, Gregor


Atkinson, Norman
Fraser, John (Lambeth, N'w'd)
McMillan, Tom (Glasgow C)


Barnett, Guy (Greenwich)
Freeson, Reginald
Madden, Max


Barnett, Rt Hon Joel (Heywood)
Freud, Clement
Magee, Bryan


Bates, Alf
Garrett, John (Norwich S)
Mahon, Simon


Bean, R. E.
Garrett, W. E. (Wallsend)
Mallalieu, J. P. W.


Beith, A. J.
George, Bruce
Marks, Kenneth


Benn, Rt Hon Anthony Wedgwood
Gilbert, Dr John
Marshall, Dr Edmund (Goole)


Bennett, Andrew (Stockport N)
Ginsburg, David
Marshall, Jim (Leicester S)


Bidwell, Sydney
Golding, John
Maynard, Miss Joan


Bishop, E. S.
Gould, Bryan
Meacher, Michael


Blenkinsop, Arthur
Gourlay, Harry
Mellish, Rt Hon Robert


Boardman, H.
Graham, Ted
Mikardo, Ian


Booth, Rt Hon Albert
Grant, George (Morpeth)
Millan, Rt Hon Bruce


Boothroyd, Miss Betty
Grocott, Bruce
Miller, Dr M. S. (E Kilbride)


Bottomley, Rt Hon Arthur
Harrison, Walter (Wakefield)
Miller, Mrs Millie (Ilford N)


Bradley, Tom
Hart, Rt Hon Judith
Mitchell, Austin Vernon (Grimsby)


Brown, Hugh D. (Provan)
Hattersley, Rt Hon Roy
Molloy, William


Brown, Robert C. (Newcastle W)
Hatton, Frank
Moonman, Eric


Buchan, Norman
Hayman, Mrs Helene
Morris, Alfred (Wythenshawe)


Buchanan, Richard
Healey, Rt Hon Denis
Morris, Charles R. (Openshaw)


Callaghan, Rt Hon J. (Cardiff SE)
Heffer, Eric S.
Morris, Rt Hon J. (Aberavon)


Callaghan, Jim (Middleton &amp; P)
Hooley, Frank
Moyle, Roland


Campbell, Ian
Hooson, Emlyn
Murray, Rt Hon Ronald King


Canavan, Dennis
Horam, John
Noble, Mike


Cant, R. B.
Howell, Rt Hon Denis (B'ham, Sm H)
Oakes, Gordon


Carmichael, Neil
Howells, Geraint (Cardigan)
Ogden, Eric


Carter, Ray
Hoyle, Doug (Nelson)
O'Halloran, Michael


Carter-Jones, Lewis
Huckfield, Les
Orbach, Maurice


Cartwright, John
Hughes, Rt Hon C. (Anglesey)
Orme, Rt Hon Stanley


Castle, Rt Hon Barbara
Hughes, Robert (Aberdeen N)
Ovenden, John


Clemitson, Ivor
Hughes, Roy (Newport)
Owen, Rt Hon Dr David


Cocks, Rt Hon Michael
Hunter, Adam
Padley, Walter


Cohen, Stanley
Irvine, Rt Hon Sir A. (Edge Hill)
Palmer, Arthur


Coleman, Donald
Irving, Rt Hon S. (Dartford)
Pardoe, John


Colquhoun, Ms Maureen
Jackson, Colin (Brighouse)
Park, George


Conlan, Bernard
Jackson, Miss Margaret (Lincoln)
Parry, Robert


Cook, Robin F. (Edin C)
Janner, Greville
Pavitt, Laurie


Corbett, Robin
Jay, Rt Hon Douglas
Pendry, Tom


Cowans, Harry
Jeger, Mrs Lena
Penhaligon, David


Cox, Thomas (Tooting)
Jenkins, Hugh (Putney)
Perry, Ernest


Crawshaw, Richard
John, Brynmor
Prentice, Rt Hon Reg


Crowther, Stan (Rotherham)
Johnson, James (Hull West)
Price, William (Rugby)


Cryer, Bob
Johnson, Walter (Derby S)
Radice, Giles


Cunningham, G. (Islington S)
Johnston, Russell (Inverness)
Rees, Rt Hon Merlyn (Leeds S)


Cunningham, Dr J. (Whiteh)
Jones, Alec (Rhondda)
Richardson, Miss Jo


Davidson, Arthur
Jones, Barry (East Flint)
Roberts, Albert (Normanton)


Davies, Bryan (Enfield N)
Jones, Dan (Burnley)
Roberts, Gwilym (Cannock)


Davies, Denzil (Llanelli)
Judd, Frank
Robinson, Geoffrey


Davies, Ifor (Gower)
Kaufman, Gerald
Roderick, Caerwyn


Davis, Clinton (Hackney C)
Kelley, Richard
Rodgers, George (Chorley)


Deakins, Eric
Kerr, Russell
Rodgers, Rt Hon William (Stockton)


Dean, Joseph (Leeds West)
Kilroy-Silk, Robert
Rooker, J. W.


Dempsey, James
Kinnock, Neil
Rose, Paul B.


Doig, Peter
Lambie, David
Ross, Stephen (Isle of Wight)


Douglas-Mann, Bruce
Lamborn, Harry
Ross, Rt Hon W. (Kilmarnock)


Duffy, A. E. P.
Lamond, James
Rowlands, Ted


Dunnett, Jack
Latham, Arthur (Paddington)
Ryman, John


Eadie, Alex
Leadbitter, Ted
Sandelson, Neville


Edge, Geoff
Lee, John
Sedgemore, Brian


Ellis, John (Brigg &amp; Scun)
Lestor, Miss Joan (Eton and Slough)
Selby, Harry


English, Michael
Lever, Rt Hon Harold
Shaw, Arnold (Ilford South)


Ennals, David
Lewis, Ron (Carlisle)
Sheldon, Rt Hon Robert


Evans, Fred (Caerphilly)
Lomas, Kenneth
Shore, Rt Hon Peter


Evans, Ioan (Aberdare)
Loyden, Eddie
Short, Mrs Renee (Wolv NE)


Ewing, Harry (Stirling)
Luard, Evan
Silkin, Rt Hon S. C. (Dulwich)







Sillars, James
Thomas, Ron (Bristol NW)
Whitlock, William


Silverman, Julius
Thorne, Stan (Preston South)
Willey, Rt Hon Frederick


Skinner, Dennis
Tierney, Sydney
Williams, Rt Hon Alan (Swansea W)


Small, William
Tinn, James
Williams, Alan Lee (Hornch'ch)


Smith, John (N Lanarkshire)
Tomlinson, John
Williams, Rt Hon Shirley (Hertford)


Snape, Peter
Torney, Tom
Williams, Sir Thomas (Warrington)


Spearing, Nigel
Tuck, Raphael
Wilson, Alexander (Hamilton)


Spriggs, Leslie
Varley, Rt Hon Eric G.
Wilson, Rt Hon Sir Harold (Huyton)


Stallard, A. W.
Wainwright, Edwin (Dearne V)
Wilson, William (Coventry SE)


Stewart, Rt Hon M. (Fulham)
Walden, Brian (B'ham, L'dyw'd)
Wise, Mrs Audrey


Stoddart, David
Walker, Harold (Doncaster)
Woodall, Alec


Stott, Roger
Walker, Terry (Kingswood)
Woof, Robert


Strang, Gavin
Ward, Michael
Wrigglesworth, Ian


Strauss, Rt Hon G. R.
Watkins, David
Young, David (Bolton E)


Summerskill, Hon Dr Shirley
Weetch, Ken



Swain, Thomas
Weitzman, David
TELLERS FOR THE NOES:


Taylor, Mrs Ann (Bolton W)
Wellbeloved, James
Mr. James Hamilton and


Thomas, Jeffrey (Abertillery)
White, Frank R. (Bury)
Mr. Joseph Harper.


Thomas, Mike (Newcastle E)
White, James (Pollok)

Question accordingly negatived.

Amendment proposed: No. 7, in page 5, line 26, leave out subsection (4) and insert:
'(4) In section 12(1) of the said Act of 1971. at end add "except for the period from 29th March 1977 to 31st May 1977, when the

rebate shall be at a rate of 2½ p a gallon less than the rate at which the duty is charged".'—[Sir G. Howe.]

Question put, That the amendment be made:—

The Committee divided: Ayes 250, Noes 269.

Division No. 125]
AYES
[8.15 p.m.


Adley, Robert
Eden, Rt Hon Sir John
Hunt, David (Wirral)


Aitken, Jonathan
Edwards, Nicholas (Pembroke)
Hunt, John (Bromley)


Alison, Michael
Elliott, Sir William
Hurd, Douglas


Amery, Rt Hon Julian
Emery, Peter
Hutchison, Michael Clark


Arnold, Tom
Evans, Gwynfor (Carmarthen)
Irving, Charles (Cheltenham)


Atkins, Rt Hon H. (Spelthorne)
Eyre, Reginald
James, David


Awdry, Daniel
Fairbairn, Nicholas
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)


Bain, Mrs Margaret
Fairgrieve, Russell
Johnson Smith, G. (E Grinstead)


Baker, Kenneth
Fell, Anthony
Jones, Arthur (Daventry)


Bell, Ronald
Finsberg, Geoffrey
Jopling, Michael


Benyon, W.
Fisher, Sir Nigel
Joseph, Rt Hon Sir Keith


Berry, Hon Anthony
Fletcher, Alex (Edinburgh N)
Kershaw, Anthony


Biffen, John
Fookes, Miss Janet
Kimball, Marcus


Biggs-Davison, John
Forman, Nigel
King, Evelyn (South Dorset)


Blaker, Peter
Fowler, Norman (Sutton C'f'd)
King, Tom (Bridgwater)


Body, Richard
Fox, Marcus
Kitson, Sir Timothy


Boscawen, Hon Robert
Fraser, Rt Hon H. (Stafford &amp; St)
Knight, Mrs Jill


Bottomley, Peter
Fry, Peter
Knox, David


Bowden, A. (Brighton, Kemptown)
Galbraith, Hon T. G. D.
Lamont, Norman


Boyson, Dr Rhodes (Brent)
Gardiner, George (Reigate)
Latham, Michael (Melton)


Braine, Sir Bernard
Gardner, Edward (S Fylde)
Lawrence, Ivan


Brittan, Leon
Gilmour, Rt Hon Sir Ian (Chesham)
Lawson, Nigel


Brocklebank-Fowler, C.
Gilmour, Sir John (East Fife)
Lewis, Kenneth (Rutland)


Brooke, Peter
Glyn, Dr Alan
Lloyd, Ian


Brotherton, Michael
Godber, Rt Hon Joseph
Loveridge, John


Bryan, Sir Paul
Goodhart, Philip
Luce, Richard


Buchanan-Smith, Alick
Goodhew, Victor
MacCormick, Iain


Buck, Antony
Goodlad, Alastair
McCrindle, Robert


Budgen, Nick
Gorst, John
Macfarlane, Neil


Bulmer, Esmond
Gow, Ian (Eastbourne)
MacGregor, John


Burden, F. A.
Gower, Sir Raymond (Barry)
MacKay, Andrew (Stechford)


Butler, Adam (Bosworth)
Gray, Hamish
Macmillan, Rt Hon M. (Farnham)


Carlisle, Mark
Griffiths, Eldon
McNair-Wilson, M. (Newbury)


Chalker, Mrs Lynda
Grist, Ian
McNair-Wilson, P. (New Forest)


Churchill, W. S.
Grylls, Michael
Madel, David


Clark, Alan (Plymouth, Sutton)
Hall, Sir John
Marten, Neil


Clark, William (Croydon S)
Hall-Davis, A. G. F.
Mates, Michael


Clarke, Kenneth (Rushcliffe)
Hamilton, Michael (Salisbury)
Mather, Carol


Clegg, Walter
Hampson, Dr Keith
Maude, Angus


Cockcroft, John
Hannam, John
Maudling, Rt Hon Reginald


Cope, John
Harrison, Col Sir Harwood (Eye)
Mawby, Ray


Cormack, Patrick
Harvie Anderson, Rt Hon Miss
Maxwell-Hyslop, Robin


Costain, A. P.
Hastings, Stephen
Mayhew, Patrick


Crawford, Douglas
Havers, Sir Michael
Meyer, Sir Anthony


Crouch, David
Hawkins, Paul
Miller, Hal (Bromsgrove)


Crowder, F. P.
Hayhoe, Barney
Mills, Peter


Davies, Rt Hon J. (Knutsford)
Henderson, Douglas
Miscampbell, Norman


Dean, Paul (N Somerset)
Hicks, Robert
Mitchell, David (Basingstoke)


Dodsworth, Geoffrey
Higgins, Terence L.
Moate, Roger


Douglas-Hamilton, Lord James
Hodgson, Robin
Monro, Hector


Drayson, Burnaby
Holland, Philip
Montgomery, Fergus


du Cann, Rt Hon Edward
Hordern, Peter
Moore, John (Croydon C)


Durant, Tony
Howe, Rt Hon Sir Geoffrey
More, Jasper (Ludlow)


Dykes, Hugh
Howell, David (Guildford)
Morgan, Geraint






Morgan-Giles, Rear-Admiral
Roberts, Michael (Cardiff NW)
Tebbit, Norman


Morris, Michael (Northampton S)
Roberts, Wyn (Conway)
Temple-Morris, Peter


Morrison, Charles (Devizes)
Rossi, Hugh (Hornsey)
Thatcher, Rt Hon Margaret


Morrison, Hon Peter (Chester)
Rost, Peter (SE Derbyshire)
Thomas, Rt Hon P. (Hendon S)


Mudd, David
Royle, Sir Anthony
Thompson, George


Neave, Airey
Sainsbury, Tim
Townsend, Cyril D.


Nelson, Anthony
St. John-Stevas, Norman
Trotter, Neville


Neubert, Michael
Shaw, Giles (Pudsey)
van Straubenzee, W. R.


Newton, Tony
Shelton, William (Streatham)
Vaughan, Dr Gerard


Nott, John
Shepherd, Colin
Viggers, Peter


Onslow, Cranley
Shersby, Michael
Wakeham, John


Oppenheim, Mrs Sally
Silvester, Fred
Walder, David (Clitheroe)


Page, Rt Hon R. Graham (Crosby)
Sims, Roger
Wall, Patrick


Page, Richard (Workington)
Skeet, T. H. H.
Walters, Dennis


Parkinson, Cecil
Smith, Dudley (Warwick)
Watt, Hamish


Pattie, Geoffrey
Smith, Timothy John (Ashfield)
Weatherill, Bernard


Percival, Ian
Speed, Keith
Wells, John


Peyton, Rt Hon John
Spence, John
Welsh, Andrew


Price, David (Eastleigh)
Spicer, Michael (S Worcester)
Whitelaw, Rt Hon William


Prior, Rt Hon James
Sproat, Iain
Wiggin, Jerry


Pym, Rt Hon Francis
Stainton, Keith
Wigley, Dafydd


Rathbone, Tim
Stanbrook, Ivor
Wilson, Gordon (Dundee E)


Rawlinson, Rt Hon Sir Peter
Stanley, John
Winterton, Nicholas


Rees, Peter (Dover &amp; Deal)
Steen, Anthony (Wavertree)
Wood, Rt Hon Richard


Rees-Davies, W. R.
Stewart, Rt Hon Donald
Young, Sir G. (Ealing, Acton)


Renton, Rt Hon Sir D. (Hunts)
Stewart, Ian (Hitchin)
Younger, Hon George


Renton, Tim (Mid-Sussex)
Stokes, John



Rhodes James, R.
Stradling Thomas, J.
TELLERS FOR THE AYES:


Ridley, Hon Nicholas
Tapsell, Peter
Mr. Spencer le Marchant and


Ridsdale, Julian
Taylor, R. (Croydon NW)
Mr. Jim Lester.


Rifkind, Malcolm
Taylor, Teddy (Cathcart)





NOES


Abse, Leo
Davidson, Arthur
Horam, John


Allaun, Frank
Davies, Bryan (Enfield N)
Howell, Rt Hon Denis (B'ham, Sm H)


Archer, Peter
Davies, Denzil (Llanelli)
Howells, Geraint (Cardigan)


Armstrong, Ernest
Davies, Ifor (Gower)
Hoyle, Doug (Nelson)


Ashley, Jack
Davis, Clinton (Hackney C)
Huckfield, Les


Ashton, Joe
Deakins, Eric
Hughes, Rt Hon C. (Anglesey)


Atkins, Ronald (Preston N)
Dean, Joseph (Leeds West)
Hughes, Robert (Aberdeen N)


Atkinson, Norman
Dell, Rt Hon Edmund
Hughes, Roy (Newport)


Barnett, Guy (Greenwich)
Dempsey, James
Hunter, Adam


Barnett, Rt Hon Joel (Heywood)
Doig, Peter
Irvine, Rt Hon Sir A. (Edge Hill)


Bates, Alf
Douglas-Mann, Bruce
Irving, Rt Hon S. (Dartford)


Bean, R. E.
Duffy, A. E. P.
Jackson, Colin (Brighouse)


Beith, A. J.
Dunnett, Jack
Jackson, Miss Margaret (Lincoln)


Benn, Rt Hon Anthony Wedgwood
Eadie, Alex
Janner, Greville


Bennett, Andrew (Stockport N)
Edge, Geoff
Jay, Rt Hon Douglas


Bidwell, Sydney
Ellis, John (Brigg &amp; Scun)
Jeger, Mrs Lena


Bishop, E. S.
English, Michael
Jenkins, Hugh (Putney)


Blenkinsop, Arthur
Ennals, David
John, Brynmor


Boardman, H.
Evans, Fred (Caerphilly)
Johnson, James (Hull West)


Booth, Rt Hon Albert
Evans, Ioan (Aberdare)
Johnson, Walter (Derby S)


Boothroyd, Miss Betty
Ewing, Harry (Stirling)
Johnston, Russell (Inverness)


Bottomley, Rt Hon Arthur
Faulds, Andrew
Jones, Alec (Rhondda)


Bradley, Tom
Fitch, Alan (Wigan)
Jones, Barry (East Flint)


Brown, Hugh D. (Provan)
Flannery, Martin
Jones, Dan (Burnley)


Brown, Robert C. (Newcastle W)
Fletcher, Ted (Darlington)
Judd, Frank


Buchan, Norman
Foot, Rt Hon Michael
Kaufman, Gerald


Buchanan, Richard
Ford, Ben
Kelley, Richard


Callaghan, Rt Hon J. (Cardiff SE)
Fowler, Gerald (The Wrekin)
Kerr, Russell


Cellaghan, Jim (Middleton &amp; P)
Fraser, John (Lambeth, N'w'd)
Kilroy-Silk, Robert


Campbell, Ian
Freeson, Reginald
Kinnock, Neil


Canavan, Dennis
Freud, Clement
Lambie, David


Cant, R. B.
Garrett, John (Norwich S)
Lamborn, Harry


Carmichael, Neil
Garrett, W. E. (Wallsend)
Lamond, James


Carter, Ray
George, Bruce
Latham, Arthur (Paddington)


Carter-Jones, Lewis
Gilbert, Dr John
Leadbitter, Ted


Cartwright, John
Ginsburg, David
Lee, John


Castle, Rt Hon Barbara
Golding, John
Lestor, Miss Joan (Eton and Slough)


Clemitson, Ivor
Gould, Bryan
Lever, Pt Hon Harold


Cocks, Rt Hon Michael
Gourlay, Harry
Lewis, Ron (Carlisle)


Cohen, Stanley
Grant, George (Morpeth)
Lomas, Kenneth


Coleman, Donald
Grocott, Bruce
Loyden, Eddie


Colquhoun, Ms Maureen
Hamilton, James (Bothwell)
Luard, Evan


Conlan, Bernard
Harper, Joseph
Lyon, Alexander (York)


Cook, Robin F. (Edin C)
Harrison, Walter (Wakefield)
Lyons, Edward (Bradford W)


Corbett, Robin
Hart, Rt Hon Judith
McCartney, Hugh


Cowans, Harry
Hattersley, Rt Hon Roy
McDonald, Dr Oonagh


Cox, Thomas (Tooting)
Hatton, Frank
McElhone, Frank


Crawshaw, Richard
Hayman, Mrs Helene
MacFarquhar, Roderick


Crowther, Stan (Rotherham)
Healey, Rt Hon Denis
MacKenzie, Gregor


Cryer, Bob
Heffer, Eric S.
McMillan, Tom (Glasgow C)


Cunningham, G. (Islington S)
Hooley, Frank
Madden, Max


Cunningham, Dr J. (Whiteh)
Hooson, Emlyn
Magee, Bryan







Mahon, Simon
Radice, Giles
Taylor, Mrs Ann (Bolton W)


Mallalieu, J. P. W.
Rees, Rt Hon Merlyn (Leeds S)
Thomas, Jeffrey (Abertillery)


Marks, Kenneth
Richardson, Miss Jo
Thomas, Mike (Newcastle E)


Marshall, Dr Edmund (Goole)
Roberts, Albert (Normanton)
Thomas, Ron (Bristol NW)


Marshall, Jim (Leicester S)
Roberts, Gwilym (Cannock)
Thome, Stan (Preston South)


Maynard, Miss Joan
Robinson, Geoffrey
Tierney, Sydney


Meacher, Michael
Roderick, Caerwyn
Tomlinson, John


Mellish, Rt Hon Robert
Rodgers, George (Chorley)
Torney, Tom


Mikardo, Ian
Rodgers, Rt Hon William (Stockton)
Tuck, Raphael


Millan, Rt Hon Bruce
Rooker, J. W.
Varley, Rt Hon Eric G.


Miller, Dr M. S. (E Kilbride)
Rose, Paul B.
Wainwright, Edwin (Dearne V)


Miller, Mrs Millie (Ilford N)
Ross, Stephen (Isle of Wight)
Walden, Brian (B'ham, L'dyw'd)


Mitchell, Austin Vernon (Grimsby)
Ross, Rt Hon W. (Kilmarnock)
Walker, Harold (Doncaster)


Molloy, William
Rowlands, Ted
Walker, Terry (Kingswood)


Moonman, Eric
Ryman, John
Ward, Michael


Morris, Alfred (Wythenshawe)
Sandelson, Neville
Watkins, David


Morris, Charles R. (Openshaw)
Sedgemore, Brian
Weetch, Ken


Morris, Rt Hon J. (Aberavon)
Selby, Harry
Weitzman, David


Moyle, Roland
Shaw, Arnold (Ilford South)
Wellbeloved, James


Murray, Rt Hon Ronald King
Sheldon, Rt Hon Robert
White, Frank R. (Bury)


Noble, Mike
Shore, Rt Hon Peter
White, James (Pollok)


Oakes, Gordon
Short, Mrs Renée (Wolv NE)
Whitlock, William


Ogden, Eric
Silkin, Rt Hon S. C. (Dulwich)
Willey, Rt Hon Frederick


O'Halloran, Michael
Sillars, James
Williams, Rt Hon Alan (Swansea W)


Orbach, Maurice
Silverman, Julius
Williams, Alan Lee (Hornch'ch)


Orme, Rt Hon Stanley
Skinner, Dennis
Williams, Rt Hon Shirley (Hertford)


Ovenden, John
Small, William
Williams, Sir Thomas (Warrington)


Owen, Rt Hon Dr David
Smith, John (N Lanarkshire)
Wilson, Alexander (Hamilton)


Padley, Walter
Snape, Peter
Wilson, Rt Hon Sir Harold (Huyton)


Palmer, Arthur
Spearing, Nigel
Wilson, William (Coventry SE)


Pardoe, John
Spriggs, Leslie
Wise, Mrs Audrey


Park, George
Stallard, A. W.
Woodall, Alec


Parry, Robert
Stewart, Rt Hon M. (Fulham)
Woof, Robert


Pavitt, Laurie
Stoddart, David
Wrigglesworth, Ian


Pendry, Tom
Stott, Roger
Young, David (Bolton E)


Penhaligon, David
Strang, Gavin



Perry, Ernest
Strauss, Rt Hon G. R.
TELLERS FOR THE NOES:


Prentice, Rt Hon Reg
Summerskill, Hon Dr Shirley
Mr. James Tinn and


Price, William (Rugby)
Swain, Thomas
Mr. Ted Graham.

Question accordingly negatived.

Mr. Atkinson: I beg to move Amendment No. 9, in page 5, line 29, at end insert:
'Provided that this subsection shall not apply after 6th August 1977 to gas oil supplied to local authorities for the purpose of supply fuel for domestic district heating schemes run by the authorities for tenants housed by them.'
There is a substantial difference between gas oil supplied to council tenants for domestic heating and gas oil supplied to industry. That is why I thought it necessary to put down an amendment separate from those which have already been discussed.
The amendment relates only to council tenants, defined as those who are committed to district heating schemes fired by oil. I make that distinction because they are at a particular disadvantage not only because of the recent increases in the cost of gas oil but because this increase in taxation is an unfair levy upon tenants who are prisoners of these schemes. They have no escape from such schemes. Once they are tenants of housing estates committed to the supply of heat by district methods and fired by oil, they are prisoners of those schemes. Until we can change that, possibly by

changing to alternative fuels, they have to suffer those sorts of levies.
8.30 p.m.
Earlier in the Committee exchanges we heard comments from the Liberal spokesman about the condition of rural transport in Cornwall. The hon. Gentleman quoted some figures and said that living standards in Cornwall were considerably less than elsewhere in the country because people had to face quite sizeable transport costs on the basis of very low take-home wage averages. If we relate some of the hon. Gentleman's remarks to the problem suffered by Londoners I suggest that we find that Londoners, particularly those affected by heating costs of this sort, are possibly worse off than people in Cornwall. There is a remarkable regional argument to be made in favour of Londoners against people such as those in Cornwall and elsewhere in outer areas of the United Kingdom, where average take-home pay is possibly less than it is in London.
The point that I am making is that if we take heating costs alone, brought about by oil-fired systems of the sort to which I have referred, in my constituency, which is part of Haringey—this also


applies to five London boroughs—tenants of three-bedroom houses who are linked to district heating oil-fired schemes are charged about £335 a year. On top of that, for cooking, lighting and topping up the heating in the five months of the year when it is not available, they have to pay a further £150. That works out at a crude aggregate of about £485 a year for district heating, lighting and some cooking.
When we add that amount to average rent and rates of about £12·50 a week for the sort of council tenants I am referring to, it means that their outgoings for heating, lighting, cooking, rent and rates are well above £22 a week, yet they have a take-home average not so much more than the figures quoted for Cornwall, Scotland and Wales. When we make that sort of deduction it can be argued that living standards in the London area could be less than those quoted for Cornwall and elsewhere.
Real pressure is being put upon people who are having to pay these additional costs. The argument started some three years ago, about extractions of London weighting, was a result of consideration being given to heating schemes and the like. The argument was compelling at that time. We still have the same sort of problems. Additional taxes amount to only 1½p per gallon. That is nothing. It may amount to 20p or 18p per week per dwelling. That is nothing at all. But in principle it is totally wrong to impose this additional taxation on tenants who are prisoners of what is already a very expensive scheme.
The point is that we must consider the morality of taxation when we are thinking of the arguments about the self-generation of funds within the gas and electricity industries and how to capitalise them from their own resources. That sort of argument, and the morality of doing that, must be placed alongside the morality of imposing further taxation of this sort, albeit only a small amount. I am not claiming that we are talking about back-breaking amounts, but possibly the small amount that really breaks the back will be this 1½p per gallon.
Possibly in answer to the Government's case, I would say that it is not feasible to separate this argument from the general taxation question. In London,

the GLC negotiates a contractual arrangement with the oil companies on behalf of the London boroughs and the London boroughs then receive gas oil at the price negotiated. By identifying those contracts by giving them a name, like blue contracts, yellow contracts, or whatever, the Government could ensure that these contracts were subject to a different level of taxation.
It is possible for the Government to accept this amendment. It is technically feasible. All the contracts for district heating schemes are identifiable. They are negotiated on a bulk basis and they are subject to special conditions, all brought about because of the additional imposition of 8 per cent. VAT on the contracts. So it is possible to identify them quite clearly and to say that bulk purchase by the local authorities is subject to a different level of taxation and by that means to make the conditions quite different for district-heated tenants as against anyone else.

Mr. John Cope: When the hon. Gentleman refers to district heating schemes, does he include a block of council flats which may be in the same position of having one heating plant, however it is fired, thereby placing the tenants in the same position as the district-heated tenants to whom he is referring? If so, does he think that his amendment should also apply to tenants in a block of flats who rent from a private landlord, as opposed to a council?

Mr. Atkinson: Taking the last point first, I should like to include the lot, but the question there is how to go about doing it. Very seldom are the oil supplies negotiated under special arrangements as they are with the GLC and other local authorities. Let me further complicate that answer by saying that I agree that all district heating schemes would be included, as should all those tenants of flats where there is a common source from which all the flats are heated. I say that because they, too, have had no opportunity in the last few years of bringing about conversions themselves. If they are council tenants, as distinct from private tenants, there are special problems. Under Section 105 of the local authority Acts, it is not possible for a local authority to provide money to bring


about the conversion. It may be possible in the not-too-distant future to negotiate with the Government the means by which local authorities can convert.
Private tenants are not so much tied prisoners of their systems because, possibly, they could gas-fire the boilers, as against using gas oil. They themselves could carry out fairly inexpensive conversions, and there is a great attraction to do that in current circumstances.
I single out councils because they are subject to special problems. But I include flat occupiers in all district heating schemes. If I had any choice, I would exclude all domestic heating. As I said earlier, if I had been included in the discussions or negotiations that took place about the content of the Budget, I would have argued the case for their exclusion. However, that is another matter. My amendment is on the very narrow point of council tenants in schemes which I have defined as "district heating" or, as the hon. Member for Gloucestershire, South (Mr. Cope) made clear, the occupiers of blocks of flats as well.
I hope that the Government can make a concession. We are not asking for much money. I understand that the total cost would be less than £1 million. The Government will probably say that district-heated schemes cover about 155,000 tenancies. The total is much bigger if one includes the blocks of tenancies which I have talked about and which the hon. Member for Gloucestershire, South mentioned. Even so, the total cost to the Exchequer would not amount to more than £1 million.
I think that my amendment is feasible and absolutely just. The morality is unquestionable, and only small amounts of money are involved.

Mr. Robert Sheldon: My hon. Friend the Member for Tottenham (Mr. Atkinson) has put the case for his constituents with great clarity. We can understand the problems for my hon. Friend as the representative of council tenants who, to use my hon. Friend's words, are committed to using heating schemes over the choice of which they had little control. In a graphic phrase, he described them as prisoners of the scheme and we understand his point.
The Haringey borough has oil-fired district heating schemes. My hon. Friend has examined the cost in some detail and has spoken of it tonight. I am pleased to note that my hon. Friend agrees that, even though it is difficult to accept any increases in heating costs at a time of pay restraint, the increase is not large, possibly amounting to about 20p a week. The extra cost will obviously vary according to the flat and the block in question.
However, I accept the difficulties that arise from any sudden increase in a period of pay restraint. My hon. Friend's points need closer examination, and I shall be happy to go into them. If my hon. Friend will give us time to consider the matter, we can probably return to it on Report. I hope that with that assurance my hon. Friend will seek leave to withdraw the amendment.

Mr. Atkinson: With that assurance, I shall willingly seek leave to withdraw the amendment. I look forward to the Report stage, when I hope that the Government will accept the logic of the case and make positive suggestions. 
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 10, in page 5, line 31, at end add
'but as respects the period beginning at that time and ending at 6 o'clock in the evening of 5th August 1977 the rate of the duty of excise charged by section 11 of the said Act of 1975 shall, notwithstanding subsection (1) above, be £0·3500 a gallon in the case of light oil as well as heavy oil and the provisions mentioned in paragraph (b) of that subsection shall have effect accordingly'.—[Mr. Denzil Davies.]

Clause 4, as amended, ordered to stand part of the Bill.

Clause 15

CHARGE OF INCOME TAX FOR 1977–78

Mr. David Howell: I beg to move Amendment No. 15, in page 11, line 12, leave out '35 per cent.' and insert '33 per cent.'.

The First Deputy Chairman (Sir Meyer Galpern): With this amendment we may take Amendment No. 24A, in page 11, line 25, at end insert—
(2) Each individual shall be entitled to an allowance of 15/35 of the total income tax


payable by that individual up to a maximum allowance of 15/35 of £416.

Mr. Howell: We have now come to the main clause, which is concerned with rates of income tax. Earlier this evening some of us were privileged to hear an excellent speech by the hon. Member for Birmingham, Ladywood (Mr. Walden), in which he argued—I paraphrase—that the House would do better to concentrate on the great issues of the level of income tax, which he argued—with my full approval—was excessive, and the level of value added tax, rather than on minor matters. Therefore, I think that if he were present he would be pleased that we are now coming to this major issue.
8.45 p.m.
It is a quirk of our procedure that we come to this immensely important issue of the level of the standard rate of income tax just at the time when many hon. Members are heading towards a well-deserved dinner. Apparently, we shall be discussing it, at least for the next few minutes, in a not very crowded House, whereas the debate on the petrol duty was well attended. That is perhaps inevitable, because at one time it looked as though the Lib-Lab pact would be undermined, together with the possibility of getting the Government to back down. However, the pact was saved in the nick of time by the usual deal over the week-end, so that the matter was settled as it could have been settled in the House in the first place. But that does not apply to the issue of income tax, on which the various parties will no doubt make their positions clear.
We have three main reasons for the amendment. First, we want to know what the position of the Government now is on the question of reflation and the Budget judgment. We have, in the last hour or so, accepted a Government amendment that will have the effect of reducing revenues in the current year by £140 million. Although that figure may be small by today's astronomical Budget arithmetic, it still affects the public sector borrowing requirement and therefore the overall assessment made at the time of the Budget.
Secondly, we want to know what the position is on the proposed conditional tax cuts announced by the Chancellor in his Budget Statement. He told the House:

I have explained why it would not be prudent to commit myself absolutely to this decision
—the decision to make certain tax reductions, of which the reduction from 35 per cent. to 33 per cent. in the standard rate of income tax was one—
until a satisfactory agreement on a new pay policy has been reached, as I expect to happen well before the Finance Bill leaves the House."—[Official Report, 29th March 1977; Vol. 929, c. 283.]
That was the Chancellor's clear position in his Budget Statement, when, in his own words, he was guided by prudence in stating that he would not commit himself to this position until a satisfactory pay agreement had been reached. There were no conditional "ifs" and "buts", but a clear statement of his position. That was rather over a month ago. What is the status of that undertaking now? Is the proposed cut from 35 per cent. to 33 per cent., as presented to the Committee in this amendment, still tied to the achievement of a satisfactory pay deal—leaving aside, for the moment, what the definition of "satisfactory" is meant to be? Or is the tax cut no longer tied to a pay deal? Is it a condition, or is it not? I shall elaborate on that in a moment.
The third reason for the amendment is that we wish to register our strong feelings about this whole approach, which is being tried for the second year running, by which the Government put forward provisional proposals concerning the taxes that all the citizens of this country will pay and then explain to the House that the matter will be settled not by Parliament, not even by discussion with all outside representative bodies—if it is possible to establish full representation by outside bodies—but by discussions with the TUC, and it is argued that in the end Parliament will be dealing with it because it will be brought back to Parliament for approval. We do not like that procedure.

The Minister of State, Treasury (Mr. Denzil Davies): The hon. Gentleman is contradicting himself. He said that this would not be settled by Parliament, and he then said that it would be. How else can this 2p reduction be made, except by a vote of the House? I do not understand the hon. Gentleman.

Mr. Howell: I think that the Minister does understand, and that he is playing games. What he is arguing now, though he cannot be serious in putting this forward, is that because, ultimately, this has to come back to the House for approval, perhaps in this Finance Bill, we do not know, perhaps in another Finance Bill, it has to be passed by this House. But the reality is quite different. This happened last year, and apparently the proposal again this year, although we do not know and want to find out, is that the matter should be settled by agreement between the Government and the General Council of the TUC, which is only one outside body—I agree an important one—representing only one section of the many millions of working people who in the end would be paying, and perhaps will be paying, the new tax rate.
We believe that these arrangements should be debated and settled in Parliament. We believe, too, that it is humiliating for a free Parliament to have these matters, as it were, taken from our hands for a time and discussed and traded on elsewhere, quite apart from the fact that this time round TUC leaders have turned the whole offer down flat anyway.

Mr. John Lee: Does the hon. Gentleman feel the same sense of humiliation when our financial affairs are canvassed by either the IMF or our Common Market masters?

Mr. Howell: When certain propositions are put forward because, apparently, the matter is not within the power of this Parliament but is in the hands of the IMF as to how we behave, I do feel a certain sense of humiliation, but I do not share what I suspect is the hon. Gentleman's view about humiliation when dealing with the Common Market. I say that for the simple reason that we, as a democracy, decided, both in this House and by a referendum supporting that decision, to be an equal member of the EEC. We play our full part in that, though I, personally, would like to see us play a still stronger part. I hope that that answers the hon. Gentleman's question.
I now come in more detail to the three issues behind the amendment, and I shall deal first with the reflation question. The

Budget assessment was absolutely specific, and when the economic progress report of April, prepared by the Information Division of the Treasury, came out after the Budget, it stated categorically that
there is scope for a carefully controlled fiscal stimulus to the economy of £1½ million.
Although the report says "million", it means "billion". What is the assessment now? Where do we stand on that carefully controlled fiscal stimulus? Is it still the belief of the Government that that is right? Or are they looking for something more, and will they be able to use their withdrawal of the petrol tax to reinforce that something more?
The whole newspaper-reading world will have read about the Summit weekend that has just passed—an event that seemed to some of us to be rich in irony. One of the undertakings—it was practically at the top of the list—given by the leaders of the various nations was that an attack would be made on unemployment, which they and we consider to be of intolerable size throughout the whole of Europe. The statesmen gathered at the Summit agreed to take appropriate measures to overcome it, although at one Press conference President Carter said, with an excellent touch of realism, that making decisions is no guarantee that they will be consummated. Nevertheless, the undertaking has been given that appropriate measures will be taken to attack unemployment.
How will Britain be attacking it? We on the Opposition Benches have a first, an almost instinctive, answer. It is that we must conquer inflation. We believe that inflation, as somebody once argued about certain motor cars, is unsafe at any speed. We believe that inflation is a destroyer of jobs and is an engine of unemployment, and we put the conquering of inflation as the first necessary step in the generation of new confidence, investment and jobs.
What is the Government's answer? Is it, as we gather from various leaks in the newspapers, more reflation, of which the proposed cut in income tax from 35 per cent. to 33 per cent. is to form part? Is this greater reflation to begin from the base rate of about 13 per cent. current inflation?

Mr. Denzil Davies: The hon. Gentleman is moving an amendment that seeks


to reduce the basic rate of income tax from 35 per cent. to 33 per cent., which would amount to about £1,000 million of reflation. He is in favour of this now, presumably.

Mr. Howell: I hope that the hon. Gentleman has been listening. I have explained our three purposes in moving the amendment. One of them certainly is to establish our dislike of having conditional income tax deals. Another, as I was very careful to point out, is to find out what is happening about reflation. We have heard not merely that this cut in the basic rate from 35 per cent. to 33 per cent. is being considered but that further cuts are being considered.
Over the weekend there has been a great discussion about all the reflation that the United Kingdom is proposing to consider to overcome unemployment. Other countries whose Heads of State attended the Summit meeting may be able to do more. Indeed, they are already doing far more and achieving higher rates of growth, but in most cases that is precisely because they have not sought to reflate prematurely and have controlled their public deficits and public expenditure.
Against that background, we need a restatement of the Government's position to allay fears that the Government may now be contemplating, from a level of inflation of between 13 per cent. and 15 per cent., more reflation of a kind that would greatly add to inflation.
On top of that, and very germane to the question of the cut in income tax from 35 per cent. to 33 per cent. and the overall Budget assessment, there is the matter of the extra £½ billion of public expenditure cuts that were mentioned in the public expenditure White Paper and in the Chancellor's December statement, and which are apparently due for 1978–79. Therefore, if there is to be proper planning, which there was not last time, particularly for local authorities, these need to be worked upon and announced early in the autumn.
Are those still on? Or are the £ ½, billion of public expenditure cuts off, in the light of further inflation? We want to know. It is not satisfactory for either the Committee or the wider public to be left in doubt about the Government's current position.
I turn, secondly, to the timing of the proposed conditional deal. The Chancellor of the Exchequer said on 29th March that it would be before the Finance Bill leaves the House and that it would be impossible to make any commitment until a satisfactory arrangement had been reached. When will that be? The IMF letter to Dr. Witteveen in December last year talked about reaching an agreement in the early spring, before the budget. What has happened to that undertaking? Like other undertakings in the IMF letter, it has melted away with the warm spring weather melting the winter snow.
9.0 p.m.
We now have a new proposal and a new suggestion that was first aired authoritatively on the front page of The Sunday Times this weekend. That article stated that
Income tax is likely to be cut in August whether or not the Trades Union Congress has formally ratified a new round of wage restraint. This became clear yesterday when it was learned that Denis Healey, the Chancellor, hopes to lower the standard rate of income tax from 35 to 33 per cent at least in return for a satisfactory pay deal being agreed or being substantially in prospect.
The story appears to have been written with great authority. It went on:
Some pump-priming by Healey in the next few months is regarded as imperative by Labour MPs if they are to regain electoral ground lost to the Tories.
If this tax cut is no longer conditional it is essential that the Minister who will reply to tonight's debate should say so. It is not right for us to be left in further doubt about the matter. If the Chancellor has now abandoned his specific assertion of 29th March, and it is no longer conditional, we must know. That is one of the perfectly reasonable bases upon which we move the amendment. The Minister of State is fair, and I am sure that he will recognise that that is so and will give us a clear answer on where we stand.
Another reason why we wish to remove this amendment is that we do not like the nature of such a deal. We do not like the approach. Of course we believe—this has been said from this Dispatch Box—that pay restraint is vital to curb unemployment and procure responsible bargaining. I am sure that the Minister of State will accept that.


However, we say that that should be obtained through an open understanding and not through any deal. We say that the kind of deal that was done, supposedly in the interests of work people, under the social contract, has been immensely damaging. By the Chancellor's own admission, last year it involved taking risks with the public sector borrowing requirement, and that led to one of the most disastrous years in British economic history, certainly since the 1930s if not of all time. That is no deal for the British nation. It benefits no one, and leads to more inflation, not less.
That is why we have repeatedly said that we should seek to secure proper pay restraint within overall monetary and budgetary restraint by an open understanding and not by a deal. We were even less impressed by the arguments that were used by the Chancellor in his Budget when he put forward the case for a deal. If I remember correctly, he argued that when all was said and done, if the trade unions would accept his conditional tax cuts in exchange for wage restraint that would be worth an additional 9 per cent.—with a further gross pay rise of over 4 per cent. it would make nearly 9 per cent. in all. That, he explained, would be the benefit that would flow from accepting this conditional tax cut.
I am not sure that that argument is intellectually respectable. No one can predict what the Chancellor so blithely predicted, namely, that if a pay increase were accepted in the form of tax cuts rather than wage increases it would have the effect of cutting 2½ per cent. off the index of retail prices by the end of 1978. How can he tell? That is the kind of prediction that is made nonsense of by events and it adds to no one's confidence in Treasury figures when it is trotted out in that way. It does not inspire much confidence.
There is an assumption in what the Chancellor said that higher wage claims would, if the additional tax cuts deal were not accepted, result in higher real wages plus a bit of inflation.
In his Budget speech the right hon. Gentleman referred to tax reductions and said:

Moreover, this sort of increase in take-home pay would not add to wage costs and so to prices. So he would get further benefit from a lower rate of inflation. And this in turn will keep interest rates lower and the value of sterling higher than they would otherwise have been.
He went on:
In fact, it is difficult to exaggerate the advantages of a satisfactory pay agreement which makes it possible for me to proceed with the full income tax package of £2¼ billion."—[Official Report, 29th March 1977; Vol. 929, c. 284.]
There is an assumption there that if he does not get the conditional deal—which seems to be crumbling, anyway—higher wages will lead to higher real wages—which is questionable—and to a bit of inflation. Neither of these results is certain. If monetary policies are pointing in the other direction and other forces are at work, it is possible that higher wage claims will not lead to higher real wages, but rather to more unemployment. That is the sort of message that the Prime Minister was putting forward with great vigour and clarity a week or two ago, and I agreed with him at that time.
That whole section of the Chancellor's Budget speech was a very shaky piece of argument. I am surprised that there is anyone left in the Treasury to draft such tendentious stuff, though not so surprised that there are still Ministers willing to put it forward.
These, then, are the reasons why we do not like conditional deals. They are strengthened by the fact that the conditional status of the deal seems to be in extreme doubt, leaving the Committee and the House up in the air about the Government's economic policy. We do not know whether it is a conditional deal, whether there is to be some reflation, or whether the Government are discussing with the TUC a July Budget or an August package. A July Budget is the usual form. There is also an extra £500 million of public expenditure cuts to be introduced before the end of the year unless they have also been abandoned, despite the fact that it is in the public expenditure White Paper.
We are entitled to more clarity on all these things. I hope that the Minister will not use the narrow argument—that would not do him justice—that because we are putting forward this proposal in the amendment we must be in favour of it in all circumstances. We are in favour,


if it is the right thing to do, of having it in the Bill now. We are against setting up a conditional trade-off with wage restraint. That is not the proper way to approach the matter of pay policy or a deal or the horrendous problems lying ahead on the pay restraint front. A totally different approach is needed.
The deal approach implicit in the social contract has run its course, and those who were the architects of the social contract have run their course. A new arrangement and understanding and a fresh approach are needed. The sooner the country has a fresh Government to carry through that approach, the better it will be for the national interest.
Those are our reasons for putting forward the amendment. I hope that the Minister will give some explanations on the points that have been raised.

Mr. William Clark: I agree with my hon. Friend the Member for Guildford (Mr. Howell) that if taxation is to be reduced from 35 to 33 per cent. it should be done in Parliament. It should not be conditional. However, I do not go all the way with my hon. Friend, who seemed to place a certain amount of reliance on statements made by the Chancellor of the Exchequer. Everything the right hon. Gentleman has said in the past has always been proved wrong. I do not put much credence on the right hon. Gentleman's statements.
It is humiliating that the Chancellor in seeking to run the economy has not taken the bull by the horns and said "We must reduce taxation from 35 to 33 per cent." The Chancellor should not leave the matter to some other body, such as the TUC, for ratification.
One Labour Member asked whether the Opposition thought that the IMF episode was a humiliating one. If somebody is broke and has to go to his bank manager to borrow money, naturally the banker tells the person concerned what he has to do. One of the ironies of the present Labour Government, and indeed of previous ones, is that in the first two years of a Labour Government we see them trying to apply their economic remedies, and then we have IMF intervention. That is a trap into which all Labour Governments fall.
The doubt about whether the figure will be set at 35 or 33 per cent. is causing

a certain amount of administrative problems. For example, we do not know what will be the burden of ACT. Perhaps the Minister will tell the Committee. Then there is the subject of covenants for charities. Many administrative details are involved in the decision whether to opt for a figure of 33 or 35 per cent. Of course, one can juggle the allowances so as to affect ACT covenants and all the rest of it, and all that can be handled by legislation, but I believe that the Government are building up for themselves and for the Inland Revenue burdensome administrative problems because nobody yet knows what the rate will be.
There are some sections of the community whose members should not be paying tax at all. I am not speaking of those who are in receipt of social security benefits, because they are untaxed. This gives rise to considerable anger among others who are working and who are heavily taxed. I have in mind the section of the community who give voluntary service for an honorarium or bounty, and they surely should not be subject to tax. In many parts of the country men who serve in lifeboat crews receive 70p an hour. That sum, for which they risk their very lives, is subject to tax. It is niggardly of the Government not to make that payment tax-free.
I tabled an amendment, which was not selected, to exclude from taxation all honoraria or bounties up to a figure of £200. I do not wish to pursue that amendment, but it is a matter which the Minister may well have in mind. Many people are doing sterling work for the community whether they work in the life boat service or in the fire service. The fire services in rural areas are voluntary. Let me turn to sea rescue—

The First Deputy Chairman: Order. The hon. Gentleman a few moments ago gave the impression that he intended only to touch on his amendment. Amendment No. 16 was not selected because it was considered to be outside the scope of the Bill. Therefore, I cannot allow the hon. Gentleman to pursue the subject matter of that amendment.

9.15 p.m.

Mr. Clark: I am grateful, Sir Myer. May I then put the argument that, irrespective of what happens regarding the


33 per cent. or the 35 per cent. rate of taxation, the 33 per cent. rate should certainly be applied to those who receive an honorarium or a bounty. In view of what you say, Sir Myer, I shall not argue that they should be exempt from taxation. However, since the present general rate of tax is 35 per cent., I argue that those who do voluntary service—lifeboat men, fishermen, special constables, members of the Territorial Army—should be subject to tax only at 33 per cent. from 6th April this year.

Mr. Nick Budgen: Or a lower amount.

Mr. Clark: Or a lower amount. I am grateful to my hon. Friend, but I shall not argue for a lower amount because that would be out of order.
I hope that the Minister now understands the point. Our taxation system is thoroughly niggardly, and especially so under this Government. I shall not pursue the point, but I draw attention to what happens to Service men. They are subject to tax at 35 per cent., and they have had an increase in pay, but in many cases Service men in Ulster are now receiving only about 50p a week extra because the Government have taken back their increase under the social contract through extra rent charges and food charges.
I am sure, Sir Myer, that you do not wish me to go on to the other amendment which was not selected.

The First Deputy Chairman: No, I do not, but I was beginning to think that the hon. Gentleman was going on to include those who skilfully seek to get round the rulings of the Chair and was about to suggest that they also should be exempted from the payment of tax. The hon. Gentleman will see from the heading to Clause 15 that it does not deal with categories of people. The clause begins by providing, as he well knows, that the rate of tax shall be charged irrespective of what the individual taxpayer does. I hope, therefore, that he will bring that argument now to a close. I have allowed him to go some way on the question of exemption for those who give voluntary service, and I hope that he will say no more on that matter.

Mr. Clark: I accept your ruling, Sir Myer, and I should not for a moment wish to give the impression that I was trying to circumvent your ruling. All I say is that those who give voluntary service and receive an honorarium or bounty for so doing should be charged only 33 per cent. If the Government cannot accept a reduction to 33 per cent. for all taxpayers, let them at least accept 33 per cent. for voluntary workers such as firemen, lifeboatmen and the rest.

The First Deputy Chairman: Order. Exemptions cannot be given under Clause 15. It would require a new clause. Otherwise, I think that I might be a candidate for exemption, too.

Mr. Clark: I am glad to hear that I should have your support, Sir Myer. I end by pointing out that the whole of this clause should be examined under the Trade Descriptions Act. The heading to Part III is
Income Tax, Corporation Tax and Capital Gains Tax".
The term "capital gains tax" is a misnomer. It is an inflation gains tax.
However, having said that, I return to Amendment No. 15, which should be supported for the various reasons which my hon. Friend the Member for Guildford advanced. It is essential for the House of Commons to come to a decision. Whether we are to have 33 per cent. or 35 per cent. income tax, it is wrong for any Chancellor to keep the British taxpayer in suspense, not knowing whether his taxation will come down by two points or not.

Mr. Atkinson: The hon. Member for Guildford (Mr. Howell) made the broad point that the level of taxation generally is far too high, and one inferred from his remarks that it got worse the higher a person's income rose. But that cannot be sustained against the background of economic fact which is relevant to this debate. Up to the levels of income referred to earlier, that is, up to £22,000 a year, there is no one paying more than 50 per cent. in total taxation on such income. I do not consider that to be punitive, where a person has a tax-free income of £11,000. I think it is a very generous income indeed, even though it may be from a total of £22,000. There are very few taxpayers in this country—the Treasury Ministers will confirm this


—who pay anything like that amount of tax. They get so many exemptions from an income of £22,000 a year that the total percentage of tax paid is a good deal less than suggested. Even though on paper some of these figures of taxation look rather punitive, when we find out what people actually pay on an income of £22,000 a year it is clear that the amount of tax does not add up to more than half of the total figure at worst. In those cases where a good accountant is employed, it is very much less than that. That is the sitution.

Mr. Peter Hordern: The hon. Gentleman is quite right to look at the answers to Parliamentary Questions on this matter. In this country, somebody with a gross salary of £20,000 a year would get a net income of rather less than £10,000. In no European country does anybody at that level get a net income of less than £6,000 above the figure that would be received in the United Kingdom. This applies also to the United States and Japan. At every level of tax we consider, whether it is on a salary of £10,000, £5,000 or £2,500, there is not a single country in the world in which people are not substantially better off than people here.

Mr. Atkinson: That is on the assumption that the people in this country on such incomes are claiming no more than minimum allowances. We have a far more generous arrangement than in other countries, whereby people can claim for all kinds of things which are not permissible on the Continent.

Mr. Hordern: Such as what?

Mr. Atkinson: All sorts of things. The most convoluted insurance contracts of one sort and another qualify for tax relief and so on. It is possible to purchase property via insurance, and there are insurance offsets of one sort and another available. This can be done with a good accountant. There are professionals on the Opposition Benches, and I should very much appreciate being their student if they could teach me some of the ways in which they are able to advise clients on reducing the level of taxation. This is done very successfully in many cases. The Treasury, in giving its final figures, is able to show that the level of payment of tax in aggregate is not as high as the

figures suggested by Opposition Members.

Sir John Hall: I can give an example from my own experience. Comparing the salaries paid to executives by a company in this country and by another company in France, where they are doing the same job and getting £15,000 or its equivalent in each case, the man in this country would, after tax and all allowances receive a little under £8,000. The man in France, after tax and all allowances, would get about £11,500. The figure of £8,000 is after taking into account all the allowances available to a British taxpayer in this country. It is a fundamental difference. I have never been able to explain it satisfactorily to my own executives if I have wanted to switch them from one country to another.

Mr. Atkinson: It may be that there is a Christian millenium waiting in some of these overseas countries, where people can enhance their incomes in this way. That may well be the case, but I am not impressed with criteria of that kind. Who says that it is moral that these people should have an income of that sort? I certainly do not. I am not arguing that we ought to try to equate our position with what is happening on the Continent. Total taxation is no higher in this country than it is on the Continent, although I agree that there is a difference between direct and indirect taxation.
My argument is that we have not reached the point of excessive taxation among these upper income groups. I think that there is excessive taxation down the scale, and certainly right at the bottom of the scale taxation is punitive. There has been reference already to the take-home pay in Cornwall and elsewhere. Even people on fixed incomes and pensioners are paying taxation. It is outrageous that people are being soaked dry—[Interruption.] Well, soaked in this way. At least I am original. When I mix my metaphors, I do so in an original way. The point is that people are being soaked in a punitive way, certainly at the lower levels.
I turn now to the argument about the reduction in taxation being conditional. I am referring to the 2 per cent. reduction and the agreement which is to trigger off this taxation relief.
It is curious that the hon. Member for Guildford, in moving the amendment,


should refer to reflationary arguments. I support the amendment. However, the effect of the amendment would be to increase the borrowing requirement. If revenue is reduced as a result of a reduction in income tax, the borrowing requirement must increase unless something is done about spending.
If the hon. Gentleman wanted to continue his argument about further expenditure cuts, he could argue arithmetically that the borrowing requirement would not be increased by a reduction in taxation, but he went the other way. The hon. Gentleman asked whether the Treasury intended to honour its pledges about expenditure cuts. That is another argument with which I agree. But I do not think that in that respect the borrowing requirement is important. I do not accept the monetarist concept that there must be an absolute reduction in borrowing and that the money supply is related to the rate of inflation. It is not, and there is no evidence to suggest that it is. The IMF—the Institute of Milton Friedman—has never come up with any evidence to suggest that there is a correlation here. There is no substantiation for the Opposition's argument about the borrowing requirement and relating it to their amendment. The immediate effect of releasing £1,000 million into the economy is, of course, reflationary, but at the same time it increases the borrowing requirement.
A point was made about the relationship with the trade unions and the tax reduction being conditional. There is a moral argument here with which I agree. It is wrong to say that the nation's taxation should await the outcome of an agreement with a certain section. But that has always been the case. Even Lord Barber, as he now is, related taxation to prices. He used to say "If there is stability in the index, it makes it permissible for me to reduce taxation by a certain amount." In other words, he was referring to demand levels and economic management and using taxation or fiscal methods for managing the economy and saying "Yes, there is a relationship between prices and the amount of tax that can be released." He was making it conditional. Conservative Governments have always made it conditional. If they have used fiscal methods for the management of the

economy, they have always said "The rate of inflation determines the amount of taxation that the Chancellor is able to concede to the nation. He raises or lowers the level of taxation according to the state of the economy and the level of demand." That is what the amendment is about.
It is not new for the Chancellor to argue that his additional relief of 2 per cent. is conditional upon an agreement being made. But even that is contradictory. Ultimately the Chancellor will defeat his reflationary intention in management terms by not conceding the 2 per cent., because he concedes that it is, in itself, retroactive and goes back to the beginning of the financial year. He has agreed to inject about £1,000 million into the economy, assuming that the voluntary agreement between the TUC and its constituent unions, does not set too high targets in the negotiations over phase 3.
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The weakness of that is that the trade unionists have criticised the situation in the past because they say that non-union workers have possibly done better than they have and have thus contributed to price rises. This has been self-defeating for the trade unions because they have stood by the agreement.
Hon. Members on the Opposition Benches have claimed that the TUC does not represent the whole nation. Of course it does not, but that argument goes both ways. The TUC represents between 10 million and 11 million of the total work force. Trade unionists ask themselves why they should be bound by a wage agreement to which they have stuck rigidly, when an equal number of people are finding a hole in the netting and getting increased earnings far in excess of those the trade unionists can get because of the restrictions imposed upon them.
One of the difficulties in negotiating phase 3 will be re-establishing confidence that the agreement will mean something to these people. That is the dilemma facing us.
The contradictory aspect is when the Chancellor says that if wages go too high he cannot possibly afford to give away taxation. He is saying, in effect, that if the rate of reflation is higher than that


agreed by wage bargaining, he will not assist that reflation by giving another 2 per cent. on top of it. That is a contradictory and self-defeating argument in the final analysis, because that is the situation at which he wants to arrive. The Chancellor should say now that, in the process of reflating the economy, the workers can have taxation cuts but the Government hope that there will be some sense in the wage bargains that they strike in phase 3. That is the sensible way of going about this.
I should like to see the Chancellor putting another point of view to the TUC, to the General Council and the NEDC negotiators—the NEDC Five, as it is not six any longer because the AEUW has contracted out. He should say that if there are to be any conditions at all these should have the objective of reducing the amount of overtime. Workers should be told that they can have a reduced working week and the Government will try to make sure that they do not lose out on average earnings as a result of the reduction in hours.
In the final analysis that is the only way in which we can be job creative. It is the only way in which the Treasury can use tax relief and use it constructively in terms of job creation. The Government must talk about conditions of that sort so that the reduction in the working week does not add directly to prices and push up the rate of inflation.
If as a result of reducing the working week and being truly job creative, unit costs go phenomenally high, it would mean that the extra amount on the price index would defeat all the ideas of job creation and the hopes of finding an additional 10 per cent. of jobs in manufacturing industry.
If we talked about the conditions and timing of the 2 per cent. relief in that way, we should achieve two things. We could have freely bargained wages against a price ceiling agreed by a tripartite arrangement among the trade unions, the employers and the Government, and we should be able to use taxation to reduce the working week and allow job creativity. That is not as complicated as it might seem. No matter what has been said at the Summit conference this week or agreed among world leaders, no Western nation will start to get to grips with the dreadful unemployment problem unless

people can reduce their working week and we use modern technology to employ people and to raise general standards and the level of demand. Taxation should be used for that kind of demand management. We should have a general comprehensive approach and use these methods retrospectively.
I agree that if any message should go to the Chancellor from these debates it is to start talking freely to the unions, using neither stick nor carrot, in an attempt to approach reflation sensibly. If we can convince people of that by injecting this £1,000 million, plus another £500 million—the promised £1,500 million—into the economy as the basis of reflation, that will stimulate confidence and the kind of climate within which it may be possible to come to the sort of realistic arrangement that I have described.
But the Government should not wait for the last possible moment. They know that they cannot in the end tell the unions that there will be no tax relief, simply because living standards have declined so fast and so far that the only way that we can salvage anything politically is to start talking about the 2 per cent. now. Let the Government concede that readily. The Chancellor should now say that he calculates that it can be done before long. The concession will be retrospective anyway. Let us get on with it and tell the TUC that the Government are determined to do something not only about unemployment but about the biggest problem of all—the rate of inflation.

Mr. Pardoe: I did not agree with everything said by the hon. Member for Tottenham (Mr. Atkinson), but I did agree with his comments about the effect of the tax system on the lower income groups. Your predecessor in the Chair, Sir Myer, said that we might discuss also Amendment. No. 24A. That amendment was on the Order Paper earlier this week, but because of the printing problems it has erroneously been omitted.
The amendment would simply introduce a low rate band of tax at 20 per cent. for the first £416 of taxable income. The reason for the sum of £416 is that it is divisible by 52. We should start talking about our tax allowance and tax bands in weekly terms. It is much easier for most wage earners to understand that the first £8 of their income is taxed at 20 per cent., the next slice at 35 per cent., and so on.
At this stage, I am not arguing the question of conditionality. I am not joining the hon. Member for Guildford (Mr. Howell) on this point. What I am trying to ask is whether we should not think in terms of a lower rate band as an alternative to a reduction in the standard rate of income tax whenever that takes place. The cost of these two things is approximately the same. That is why I asked for these two amendments to be bracketed together, because it seemed to me that it would give the Committee a chance to discuss—if we have just under £1,000 million at this stage of the game to play with—whether it would not be better to do it this way rather than by reducing the standard rate of tax.
What effect will this have? Perhaps more important, upon whom will it have that effect? Obviously, one of the arguments put forward for the reduction in the standard rate is that it will help middle management. There is no doubt in my mind that middle management needs help. The incentives for middle management are very few. This case has been accepted by the Chancellor, and obviously by the Government. That is a good thing. By introducing a lower rate band of 20 per cent., one would not, of course, improve the lot of middle management as much as by reducing the standard rate of tax. That is fairly obvious. But, on the other hand, middle management are not the only people in our economic scale who are affected by disincentives.
What I said in the last debate about incomes in Cornwall, and what the hon. Member for Tottenham has said in his speech, indicates that the disincentives at the lower end of the income scale are now so great as to be utterly scandalous. It is not a question of people having 50 per cent., or 60 per cent. or 70 per cent. of their extra pounds earned. They are losing more than 100 per cent. on their extra pounds earned. A very large number of my constituents are in what we therefore call the poverty trap. They know that if they declare every other pound extra that they earn they will not get that pound, because they will lose a substantial amount both in terms of taxation and lost benefits.
Of course, one answer would be to raise thresholds. The danger about raising thresholds this year is that it is

hideously expensive to do. We know that minor changes in the thresholds that have been made in this Budget—and they are minor changes—will cost £1,000 million. To increase these thresholds any more would cost a great deal of money indeed. For that reason, if for no other, the 20 per cent. rate band is a good possible alternative.
But there are other arguments. Thirty-five pence in the pound is a ridiculous rate at which to come into income tax. When we add social security tax, the national insurance contribution, it means that one is paying 41 per cent., or something of that sort. There is no country in the Western world—I do not know whether there is a country anywhere else in the world, but I would not think so—that introduces its citizens to income tax at this high rate. It would be better to have a lower rate for that reason alone.
The arguments for dispensing with the lower rate at the time of the Budgets in the late 1960s, when Mr. Roy Jenkins was Chancellor of the Exchequer, were largely administrative arguments of the Inland Revenue. It took the view that the lower rate band was expensive to collect. It may be expensive to collect by the techniques that we use for collecting income tax. That may be one good reason for changing the way that we collect income tax and for going in for a more sensible system. I would advocate that on all sorts of grounds. But I believe for all these reasons that the lower rate band has very much to be said for it.
9.45 p.m.
If, later in the year or next year, we find that we have some more money to play with, that it is possible to make reductions because the forecasts of the public sector borrowing requirement were not accurate, which is very possible, and that there is more money to give away, the lower rate band should be given a very high priority—I think the top priority—for the reasons that I have already adduced.
Even at this stage I am, on balance, in favour of the reduced rate band rather than the 2p off the standard rate of income tax. Some hon. Members may say that that is a constituency point, because I represent a very low income


area. Indeed, I do. They do not come any lower than North Cornwall in terms of income per head. Earnings in the whole of Cornwall, according to the abstract of regional statistics, are just about the lowest of all the 63 sub-regions in the United Kingdom.
It is almost impossible for me to find a constituent for whom it is worth while going to work at all. I venture to say that there is not a single person in North Cornwall, including the Member of Parliament, who should be working for 12 months in the year from the point of view of tax advantage. But, then, 14 weeks off work would be very advantageous to everyone financially. In respect of about 85 per cent. of my constituents, one would have to say that they would be better off if they were out of work 52 weeks of the year. This is exceedingly depressing and debilitating, and it makes life almost impossible for the Member of Parliament having to give advice about whether people should go to work. One can never be put in the position of saying to a constituent "Do not go to work." So one does all the calculations on a Saturday morning across the desk and leaves one's constituent to make the decision, aware that one has argued him into the feeling that it is not worth going to work at all. Frankly, I do not think that this should be allowed to continue. I believe that the lower rate band would be a step in the right direction here.
I move on briefly to the arguments of the hon. Member for Guildford. I disagree with his main argument that this 2p reduction should not be conditional. After all, everything that a Chancellor of the Exchequer does in a Budget is or should be conditional upon the state of the economy, and pay is one of the most important economic indicators in the economy. The level of a pay settlement has to be taken into account in deciding how much fiscal stimulation can be made and how much demand should be injected into the economy.

Mr. John MacGregor: If the hon. Gentleman takes that view and there is no stage three pay settlement until September, does he believe that this reduction from 35p to 33p should be scrapped?

Mr. Pardoe: I shall be coming to that in a moment.
There is a necessary link between taxation and a pay settlement. The level of a pay settlement is an important item in the Chancellor's decision about the appropriate level of demand and, therefore, of his Budget judgment.
If the Government are responsible for managing the economy—and most of us who live in the post-Keynesian age believe that, anyway—[Interruption.] I am not, but hon. Members will have heard the right hon. and learned Member for Surrey, East (Sir G. Howe) say that taxation was now fixed like a game of Russian roulette, and he said that I had my finger on the trigger. It is a splendid quote. It will go all over my election literature. I hope that the right hon. and learned Gentleman does not excise it from the record. That will be a splendid quote, especially when the taxes start to come down. It will he even better then.
If the Government are responsible for the management of the economy, they cannot fail to take a view about the level of pay settlements. Even if one says that that is a bit vague overall, nevertheless in the public sector it is essential because the level of the public sector borrowing requirement depends to a large extent on how much the Chancellor pays public servants, which is now such an enormous part of the total of public spending. Clearly any Government will have to take a view on that.
It is very unfortunate that the pay settlement year does not happen to be the same as the beginning of the tax year. Otherwise, the Chancellor could accomplish his negotiations with the TUC and the public sector unions before the Budget. He would know what was in store in terms of pay increases and would be able to take that into account in deciding his Budget judgment. At present he has to make his Budget judgment several months in advance of the pay settlement year. It might be very advantageous if we could move towards synchronisation of the two.
I come now to the point raised by the hon. Member for Norfolk, South (Mr. MacGregor). The Liberal Party has advocated for many years the concept of a tax on inflation. The idea is that if a company undertook to abide by certain pay limits it would not have to pay the tax on inflation. If it were unable to


abide by this pay limit it would have to pay the tax, but if it subsequently honoured the agreement during that year the tax would be repaid.
That leads me to say that the Government could approach this conditionality in two ways. They could reduce the tax now by 2p. They could have said so in the Budget. The conditional part would be that unless a pay policy of X per cent. was achieved, or even a vague "satisfactory pay policy", the Government would claw it back.
I think that both of these ways are unsatisfactory, but for a different reason than that advanaced by the hon. Member for Guildford. The reason came out in the speech of the hon. Member for Tottenham, who says that the trouble with pay policy is that if one is a good boy, behaves well and keeps to the policy, as many unions have, one suffers, because many people do not keep to it.
That has always been the argument that we have put forward for having a tax on inflation, a selective tax which would not fall on the just and unjust alike but only on the unjust. Such a tax would be a penalty on a company or bargaining unit which did not stick to whatever the pay policy was. Here I am not arguing for a pay policy which is a fixed norm across the economy. We have to move to far more sophisticated ideas than that. Value-added methods of measurement might well be the best way forward.
Therefore, because I believe in a tax on inflation—and I am convinced that sooner or later, if we are to get inflation under control, we shall have to introduce one—I accept the conditionality. But I am very open on the question whether we should lower the tax first and claw it back or whether we should do it in the way that the Government have proposed. What I do not believe is that, with the negotiations as they are now, the Government should simply hold up their hands and say to the trade unions "We surrender. You can have anything you like. You can do any kind of deal you like, and it will not make any difference to taxation." Clearly, the level of pay increases that is agreed in the pay settlement is enormously important to how much money the Government feel they can put back into the economy. There I part company with the hon. Member for

Tottenham and the Conservative Party, who seem to be in an unholy alliance, a new sort of Tribune-Tory pact. They say that this tax should be reduced willy-nilly, whether we achieve a satisfactory pay settlement or not. I believe that we should wait and see.
I know that some Conservatives will ask me "What about what your leader said about a constitutional outrage?" At that time, my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel) was not my leader. The official statement from the Liberal Party at the time was wholeheartedly in favour of the conditionality in the Budget last year. The instant comment was made by me on television while the Budget speech was being made. My then leader, my right hon. Friend the Member for Devon, North (Mr. Thorpe), put out an official statement welcoming it on behalf of the Parliamentary Liberal Party. I must say that I do not believe that this conditionality is a constitutional outrage, and I have some reason to believe that my right hon. Friend the Member for Roxburgh, Selkirk and Peebles does not think so now, either. [Interruption.] All of us are open to persuasion. Men of reason have open minds. I can only say that persuasions have been taking place.

Mr. Atkinson: If the hon. Gentleman honestly believes that men of open mind are open to persuasion, why not allow agreement to be reached on the basis of trust between the trade unions, the Government and employers? Why not allow that process to take place, rather than make it conditional? The Government know that they will never be able to apply conditionality anyway. It is just not politically possible for the Government to say that they will not make this reduction after all. That is not on.

Mr. Ridley: Quite right.

Mr. Pardoe: The hon. Member for Tottenham is not right.

Mr. Ridley: Yes, he is.

Mr. Pardoe: What is politically impossible for Britain is to surrender to the forces of inflation. The Government have to secure a satisfactory pay policy and they need trust to do so. These are not just economic arguments; they are the


political facts of life. Some people in this Committee are not going to run out on inflation. These are the political facts, and we might as well be clear about them.
If I had to fight an election on any issue I would rather fight it on the threat of inflation, and warn the British people of it, than any other issue at this stage. I would be happy to fight an election now on that issue. But I have to make a choice as to which party is most likely to control inflation, and, in making that choice, anyone in my position has to look at the record of the 60 per cent. increase in money supply in the years 1971–73, and the record of the present Government, who, in the last six months anyway, have managed to get public spending and the money supply under better control than ever before. The hon. Member for Guildford went back to the 1930s in trying to describe last year's record as the worst ever, but nothing has been worse than 1971–73. The then Conservative Government were the worst that the country has ever had, in terms of economic management, since the turn of the century.

Mr. William Clark: If the hon. Gentleman is right in saying that the economic performance in 1971–73 was infinitely worse, why is it that inflation is running at double the rate it was then?

Mr. Pardoe: There is no problem about that. The hon. Gentleman wants it spelt out. He needs only to consult Milton Friedman. He and his hon. Friends believe in Milton Friedman. We know what he says will happen to the rate of inflation when one increases the money supply by 60 per cent., but one has to wait for it to happen. When the rate of inflation comes along it causes a fall in the value of the pound, and when a fall occurs in the value of the pound the result is an increase in the domestic rate of inflation and enormous pay packets.
Had there been a pay policy in 1974 that was able to hold the floodgates against the tide of the money supply, we might not have got into our present situation. But there are not many Conservatives who believe that we should have had a tough statutory policy in 1974, and such a policy was the only thing that could have helped.

Mr. Ian Stewart: Is the hon. Gentleman seriously maintaining that the fall in the value of sterling in 1976 was the result of economic policies between 1971 and 1973?

Mr. Pardoe: I am not arguing. I am not a monetarist. I am simply using the argument of Milton Friedman, which the right hon. Member for Leeds, North-East (Sir K. Joseph) and the Leader of the Conservative Party now adopt. There is no doubt in the monetary argument that that was precisely the effect of the 60 per cent. increase in the money supply in two years. Nothing like it has been seen since Henry VIII shaved bits off the coinage. It caused the rate of inflation in 1974–75, and the rate of inflation in 1974–75 caused the pound to fall in 1976. Those are simple facts—Milton Friedman, QED. The institute of Milton Friedman must come to my rescue occasionally!
In making their judgment on whether there can be a tax reduction of this sort the Government have to consider the public sector borrowing requirement, and here I part company from the hon. Member for Tottenham. It is a movable feast. It is very difficult to assess. The Government got it £2,500 million wrong in December, and they may have got it £2,500 million wrong now, because in an article in the Financial Times on the day after the Budget speech Anthony Harris pointed out that many City forecasters were already considering that the Government had got it wrong and that the PSBR would be substantially lower than the Treasury was forecasting. He went on to say that there appeared to be a good chance that the PSBR would again fall short of the forecast though not by the spectacular margin seen in 1976–77.
There is probably a good deal more money in the pipeline that the Government could use to reduce taxation, even at this stage. My guess—it cannot be more than a guess at this stage—is that come July we shall know a good deal more about the PSBR and the shape of it, and that there will be even as much as another £1,000 million that will enable the Government both to take 2p off the standard rate and to introduce the lower rate band.
I hope that the Government will consider the argument for the lower band.


I hope, too, that hon. Members on both sides of the Committee will begin to recognise that although we have to consider the problem of disincentives for

middle management, the disincentives at the lower end of the scale are such that the introduction of the lower rate band might be a preferable alternative.

Mr. Hordern: The hon. Member for Cornwall, North (Mr. Pardoe) had some interesting things to say about monetary policy, to which, apparently, he is not addicted, and about wage restraint, to which he is addicted. It seemed to me that in his analysis of the years from 1971 the hon. Gentleman restricted his comments to the years between 1971 and 1973, as though nothing had happened thereafter.
I should have thought that the hon. Gentleman could recall that one other thing that happened in 1974 was that the Government reduced the rate of VAT from 10 per cent. to 8 per cent. I cannot remember what the Liberals were doing about it then, but I do not seem to recollect that they objected to that. The consequence was the largest public sector borrowing requirement of all time, far outstripping as a proportion of the gross national product that of any country in the industrialised world. I should have thought that the hon. Member for Cornwall, North would have something to say about that so as to bring his account of what has passed up to date.
The hon. Gentleman mentioned that the Liberal Party had its—I think he said he had his—finger on the trigger. I do not know what his right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel) would say about that. The hon. Gentleman never makes a speech without criticising his leader. That is as it may be. We must accept that the hon. Gentleman has his finger on the Liberals' economic gun. However, I fear that he has not looked at the end of the gun. The end is blocked. When he presses the trigger, there will be a most unfortunate explosion and the gun will blow up in his face, which is what always happens with Liberal policies.
I was much more taken with the remarks of the hon. Member for Tottenham (Mr. Atkinson). His policy was that there should be a price freeze, free collective bargaining, and that the reduction in tax should take place. I can see wages rising quickly under that policy. The hon. Gentleman is treasurer of the Labour Party and I can see some interesting results occurring if that policy is ever carried through in the conduct of the Labour Party's finances—if there is ever a price

freeze and wages are to be freely negotiated and allowed to rise. I have never so far been so tempted, but in such an event I should for the first time be tempted to sign on as a member of the Transport House party, if that is what the hon. Gentleman would do.

Mr. Atkinson: I insist that the hon. Gentleman gets it right. My argument was that by agreement we could put a ceiling on the amount by which prices should increase year on year. Whatever that figure was to be—whether it was 6 per cent. or 7 per cent. as the allowable inflation—the trade unions could negotiate wage agreements within that ceiling which had been fixed by agreement. That is the way to bring about the redistributive effect of which I have spoken many times. It is not freezing prices but fixing a ceiling quite freely and negotiating wages within that ceiling. It is the ceiling that would become the inhibitor.

Mr. Hordern: I am grateful to the hon. Gentleman for explaining it. I stand corrected by his remarks and I shall look them up tomorrow in Hansard to ensure that I have the explanation right.
I wish to refer to the great deal which the Chancellor announced in his Budget Statement. It was a conditional deal. He said:
Given the size of the fiscal stimulus I consider justified and the net revenue resulting from the tax changes I have just described, I shall he able to make reductions in income tax amounting to some £2¼ billion in a full year—assuming we reach a pay agreement for the year from August 1977 which is consistent with our inflation objectives.
Before that, as my hon. Friend the Member for Guildford (Mr. Howell) said, in his Letter of Intent to the International Monetary Fund the Chancellor has said that he hoped to be able to present a pay agreement in March which would carry the report of the IMF. March has passed. May has come. I dare say that August will pass without any sign of a pay agreement.
As the hon. Member for Tottenham said, the deal is not conditional at all. Everybody knows now that it is politically impossible to keep the basic rate of tax at 35 per cent. It will be 33 per cent., as the hon. Gentleman rightly said,


and for very blunt reasons, political reasons, as the hon. Gentleman said.
For my part, I would not disagree with the proposition that neither for political nor for economic reasons is it sensible to keep the basic rate at 35 per cent. What I am interested in is the Government view about the rate of inflation. This is tied up so closely, as the Government argue, with the level of wage rates during the next few months. Nobody knows what it will be.
The whole substance of the Budget is based on increases in allowances—at great cost to the Treasury—which will take place on the basis of a pay agreement. In his Budget Statement the Chancellor went so far as to say:
As a result of these increases in personal allowances, 845,000 people who would otherwise have been paying income tax next year will not now do so.
I can only say, on my very rough calculations, that if anything like the original phase 1 £4 a week pay deal comes into being, all those 845,000 people will be paying tax again by the end of next year. Therefore, what is the point in referring, as this Chancellor always does, to this stage army, which flits across the fiscal stage from one year to another only to be paying tax again at the end of the year? The hon. Member for Cornwall, North is right to say that the difficulty is in whether it is better to increase allowances or to reduce the rate of tax. That is a pertinent question.
For the Chancellor everything appears to depend on the pay policy. I do not think that we have yet recognised how badly the economy has suffered during the past three years. For example, because of inflation the higher rate of tax now starts at £6,000 but, according to the rate of inflation, it should have been increased to more than £9,000.
It was interesting to hear what the Chancellor had to say about pay policy and what it would mean. He said:
Therefore, as I have explained, there would be a triple benefit for prices, worth 2½per cent. off the retail price index by the end of 1978."—[Official Report, 29th March 1977; Vol. 929, c. 279–84.
That will apparently arrive simply because of the reduction in income tax from 35 to 33 per cent. That is a remarkable calculation and I should be interested

if the Minister of State would explain how that conclusion was reached.
That is absolutely typical of the kind of calculations that we have had on every occasion from this Government. The more carefully detailed the calculations have been, the more Budgets we have had from the Government, because the more wildly wrong the calculations appear to be.
The extraordinary statement that a reduction on direct taxation worth two points would mean a 2½ per cent. reduction in the RPI makes on wonder why direct taxes have not been reduced much more. If a reduction from 35 to 33 per cent in income tax can reduce the RPI by 2½ per cent., why not reduce income tax to 25 per cent., because that would reduce the RPI by 7½ per cent?
One can look at the other side of the equation. What would be the effect of an increase in VAT by a certain amount? According to the Government's argument, a reduction in direct taxes would have a bigger effect on the RPI than a reduction in indirect taxes such as VAT. I do not have any faith in a link between the level of pay increases and the effect of a reduction in direct taxation on the level of the RPI. Such a link cannot be proved.
There is not a single other country that attempts to see such a close correlation between an apparent reduction in direct taxation and a reduction in RPI for that reason. We are unique in the way that we handle our finances in this country and we are unique in the character of the advice that we receive yearly from the Treasury and, I regret to say, from the Bank of England as well.
After three years of this Government we have reached a mad state. The correct threshold level for higher taxation rates should be £9,000 not £6,000. The hon. Member for Tottenham mentioned an income of £20,000 a year. Looking at the levels of direct taxation and at what is left after tax, one finds that a person with that income would be £6,000 a year better off in the United States, France, or Japan. That is so at every level. Even a person earning £2,500 a year—well below the average wage—receives less here than would be the case in those countries, where such a person would be £200 a year better off after tax. That is so at every level of earnings. It is true of the


lower paid and it also applies to the threshold at which one starts to pay tax.
My hon. Friend the Member for Norfolk, South (Mr. MacGregor) has done a continuing service to the House by explaining the comparative positions of those living in cities and of married couples on low wages and of the unemployed. I rely on answers to my hon. Friend's Questions for my figures. A married couple earning £40 a week would be better off out of work than at work. So, too, would a married couple with one child and on the same income, and a married couple with two children and a family income of £30 a week would also be better off out of work than in work.

10.15 p.m.

Mr. Dennis Canavan: That is because employers are so mean that they do not pay men and women enough wages. Will the hon. Gentleman now cry out for more powers to be given to wages councils to improve the income of low-wage earners?

Mr. Hordern: I do not think that the hon. Gentleman can have been listening to my remarks. Perhaps I should follow his example and speak more loudly. I was referring to the effects of taxation and the level at which people start to pay tax. On the earnings to which I referred people are better off out of work than at work.
The fault lies with the tax system and not with the employers.

Mr. Canavan: The fault lies with low wages.

Mr. Hordern: If wages were increased, the situation would be even worse.
A constituent has written to me:
My employee who assists as general factotum in my constituency practice earns £39·50 per week. Eight weeks ago he was given custody of his son by his first marriage, making his family up to 3 children. He takes home £34·06 a week and lives 10 miles from here. On Thursday he received his new income tax coding which has shown that he is to pay more tax. Evidently the new child allowance to which he is entitled has in effect reduced his income. I cannot justify a higher wage, nor could I afford to pay it…. On the dole he will get £29·50 and with other benefits and no petrol expenses to get to work, he will be better off. On Monday 9th May, he will be signing on for the dole…. I would tuggest you send a copy of this letter to Healey, Wedgwood Benn, Foot and Jones and ask for comments.

I am sorry that none of them is here, but the Government Chief Whip is here and I hope that he will pass on the comments. The letter is a practical example of the effect of a high tax threshold on low earnings.

Mr. Canavan: It is low wages that are to blame.

Mr. Hordern: The hon. Member for West Stirlingshire (Mr. Canavan) reinforces my argument. His Government are responsible for high taxation on low earnings.

Mr. Pardoe: Would the hon. Gentleman care to hazard a guess about the total income of the veterinary practice and the salary of the partner who wrote to him. Knowing rural vets' earnings, I should think that his salary was high enough to enable him to make a substantial increase in the earnings of his employee without feeling the pinch.

Mr. Hordern: I hope that the hon. Gentleman's remarks will be published in the veterinarians' magazine and that copies will be sent especially to North Cornwall. If that is how he feels about an important rural service, the fact should be more widely known. However, I do not wish to be distracted from my conclusion.

The Parliamentary Secretary to the Treasury (Mr. Michael Cocks): The hon. Member for Cornwall, North (Mr. Pardoe) was too near the bone.

Mr. Hordern: The Chief Whip is in good form tonight and enjoying himself. If he has something to say about my constituency, I shall gladly give way.
I do not wish to detain the Committee for very much longer and I wish to conclude by saying that the Government have reached the end of the road. They know that they cannot increase direct taxation any further. The hon. Member for Tottenham knows that, as do all his Labour colleagues. It will no longer do to have direct taxation or to increase penal taxation or fiscal drag.
What will happen in face of inflation, which this Government have not got under control, is that people will no longer pay higher rates of direct taxation and therefore the Government will have to obtain that revenue elsewhere by increases in indirect taxation. Every time


borrowings to help the pound are not properly covered and every time Government expenditure increases, the public will have to pay for it by indirect taxation. I do not think that the people of this country will put up with this any longer. They have had enough, and they long for a chance to put an end to this Government so that other people can show what they can do.

Mr. Ian Stewart: Amendment No. 15 deals with one of the most important aspects of the Bill, and I very much hope that the Committee will pass it. I believe that we should take a decision on the 35 per cent. or 33 per cent. now rather than leave it to some indefinite date in the future.
This matter turns on a number of separate questions, as my hon. Friend the Member for Guildford (Mr. Howell) and others have said. We must make up our minds what weight we place on each of those questions. The first relates to conditionality and the whole purpose of the phase 3 wage negotiations. The second relates to the level of personal taxation and the arithmetic of Government revenues. Thirdly, there is the economic situation and the degree to which the Budget judgment is affected.
I do not wish to spend long on the first, because it has been widely discussed, but I cannot agree with the hon. Member for Cornwall, North (Mr. Pardoe) that, because pay settlements are so important to the Government's economic strategy, Chancellors of the Exchequer should not take decisions on income tax until they know what will happen to pay settlements six or nine months later. Given the timetable of the financial year, I cannot see that it is realistic to lay down as a rule that Chancellors in their financial statements and Budgets in the spring should abdicate responsibility in terms of a decision about the rate of personal income tax on the grounds that some of the factors in the economy, which may be important in the economic strategy, are not at that stage known to them. There are plenty of other ways of dealing with the problem.
Earlier in the debate the Chief Secretary said that it would be left to a later stage to decide to what extent it might be necessary to offset reductions of Govern-

ment revenue by the petrol tax remission. Of course, there are other means of regulation which can be dealt with later.
All along the Government's statements have sought to loosen the connection between the 33 per cent. income tax rate and a satisfactory pay settlement under phase 3. I believe that that connection has now been loosened so much that it is no longer realistic. On that ground I believe that a case is made for dealing with this subject here and now and for coming to a decision as to what the base rate of income tax should be for the coming year. We should not leave the decision until half way through the year, when a sudden injection of money will be far more destabilising than if we were to settle the matter now so that we know where we stand.
The second question, relating to the level of personal taxation, is equally important. It is agreed in all parts of the Committee that, whatever method is chosen—whether by a lower band, as the Liberal Party would prefer, or by a reduction in standard rate—a starting rate of taxation of 40·75 per cent., which is the aggregate of national insurance charge and a 35 per cent. tax rate, is far too high. That is a fundamental factor which all of us face in our constituencies every week. We hear about constituents on modest incomes who are entering tax brackets in which over two-fifths of their income is taxed when those earnings are well below average industrial earnings. Therefore, on the question of the level of personal taxation the case is made and made emphatically.
The other side of that argument is whether the Government need the revenue, the extra £1,000 million this year which they would obtain by keeping the standard rate at 35 per cent. The arguments here are extremely doubtful. Purely in terms of balancing their Budget, with the information which we have today about our country's economic condition, I do not believe that there is a case for arguing that we must retain the 35 per cent rate.
I come, therefore, to the third and, in my view, overwhelming and decisive consideration, namely, the position of the economy and the Government's fundamental economic strategy. Here, I believe, the Government have been somewhat overtaken by events. What they


set out to do, with a belated sense of rectitude, was to bring the money supply under control in the latter part of 1976 and during the present year. However, because of the dramatic fall in the exchange rate last year, inflation during the first half of 1977 is running much faster than anyone in this Committee either hoped or, I imagine, even expected.
The effect of those two factors together is to exert a strong contractional effect on economic activity in the country which is beginning to be felt now and which will be strongly evident later in the year. After all, if one sets a firm limit on the availability of money and the price of everything is higher than one expected it to be, there is less economic activity in real terms which can be financed by the same amount of money. This is going back to a pretty crude and basic monetarist argument, but there is nevertheless a strong body of opinion—I share this view—that if one submits an economy to the most rigid disciplines of monetary control, with a corset on bank lending and an exchange rate policy, as it was a few months ago, designed to achieve substantial sales of public sector debt outside the banking system, and at the same time one experiences a higher than expected level of inflation, one will produce a strongly contractional economic condition. Therefore, on that ground alone, there is a strong case for the reduction of income tax from 35 per cent. to 33 per cent. being made now, regardless of any of the other questions about conditionality and the levels of personal taxation.
It seems to me that the Government's economic policy is now in danger of going badly wrong. My feeling is that the future level of prices is likely to be affected over the next six to nine months far more by the performance of world commodity prices and by the level of the exchange rate than it is by pay settlements taking place in the last half or last quarter of this year.
The Government have to look also at the purely technical consequences of having a higher than expected rate of inflation and yet not making the consequent reductions in income tax. If personal earnings are higher than they were expected to be, the Government's tax take also will be higher than it was expected to be. This will mean that the Government's deficit will be lower than it was

expected to be, and they will have to pay less interest on that lower borrowing. Thus the cumulative effect will be to reduce the level of economic activity even more sharply than it otherwise would have been.
I do not accept that the level of personal taxation is a crucial part of the pay settlement. I accept that it may have some psychological influence on the way in which trade union leaders react in wage bargaining later this year, but I do not think that it is crucial. I believe that the economic and financial factors, for the reasons which I have given, quite strongly outweigh the rather vague and now weakening aspects of the phase 3 argument.
10.30 p.m.
We have moved a long way in the six weeks since this attitude was taken by the Chancellor in his Budget. The Committee would be right to pass the amendment. I believe that it is right not only in relation to the personal taxation of millions of people who feel that they are heavily overtaxed on moderate or even immoderately low earnings, but because, if the Government are not prepared to make a Budget judgment at this stage of the year, the consequences when they do so later this year will be very serious. They will have to react more violently. They would avoid many of these consequences in future if they were to stand up and take the responsibility on their own shoulders instead of for ever passing the buck, which is the posture that they have unfortunately adopted during the past two years.

Mr. Denzil Davies: Two amendments, No. 15, in the name of the hon. Member for Guildford (Mr. Howell), and No. 24A, in the name of the hon. Member for Cornwall, North (Mr. Pardoe), are being discussed together. I shall deal first with No. 15.
The hon. Member for Guildford did not make it clear whether he wanted a Second Reading debate on general economic issues and the pay agreement in particular or to press the amendment to a Division. It is still not clear whether the official Opposition want to divide the Committee on this amendment. If so, I shall have to address my mind to the effect of the amendment on the economy. [Interruption.] I gather that they now wish to press the amendment to a Division. In-


deed, from the tenor of the speeches made by Back-Bench Opposition Members, it was clear that they did.
The issue on the amendment is whether the Committee should now decide on an extra £950 million of reflation, because that would be the effect of a reduction in the basic rate of tax from 35 per cent to 33 per cent. or whether, as my right hon. Friend the Chancellor of the Exchequer said in his Budget Statement, we should wait prudently until Report when we can decide this matter in the light of pay negotiations and a satisfactory pay agreement with the Trades Union Congress. That is the issue which it seems is to be decided by this amendment. I believe that the Conservative Opposition are behaving as imprudently now as they did when they were in office.

Mr. Hordern: Mr. Hordern rose—

Mr. Davies: I shall give way to the hon. Gentleman later.
The Opposition have never paid much attention to these matters. They are now calling for a fairly substantial reflation without any knowledge of what will happen to pay in 1977–78. That is an imprudent thing to do, but it is characteristic of the Opposition, who still have not learned from the excesses of their attempt to control the economy when they were in office.

Mr. Hordern: since the hon. Gentleman is waiting prudently until August, or whenever it may be, to make up his mind, what level of pay increase will then be satisfactory to the Government for this cut to be made in the basic rate of taxation?

Mr. Davies: The hon. Gentleman knows that these matters have been debated before. The Government's position is clear. Indeed, it is clear from the TUC Economic Committee's report. If we wish to behave as prudent people responsible for the management of the economy, we cannot decide this matter oblivious to and without reference to any pay agreement at all. The Chancellor must take that into account. On Report it will be possible to debate this matter fully in the light of negotiations with the TUC.
The hon. Member for Guildford said that the House of Commons did not

decide these matters. Of course it does. The House will have an opportunity to debate this matter again on Report. It will then be in a better position to decide whether to reduce the basic rate of tax from 35 per cent. to 33 per cent. and to allow this further reflation of £950 million.

Sir John Hall: Is the Minister actually saying that if there is no stage 3, or if the settlement arrived at is regarded as unsatisfactory by the Chancellor or the House, the Chancellor really intends not to give the reduction of 2p?

Mr. Davies: The Chancellor made the position quite clear in his Budget Statement, and it has been repeated here tonight. My hon. Friend feels that it would be quite imprudent to determine these matters until we have seen the course of the negotiations and the outlook for a pay agreement is more settled and clear. That is where the Government stand.
We know the record of the Conservatives, and we do not intend to control the economy in the way in which they did. The hon. Member for Cornwall, North made the point rather well. He taught Conservatives a monetarist lesson and explained the situation clearly to them. It is clear from a Written Answer given recently to the hon. Member for Blaby (Mr. Lawson) that the increase in money supply in 1971, 1972 and 1973 contributed to the rates of inflation that we suffered in 1974 and 1975. The British people today have had to accept the sacrifice of a pay policy because of the increase in the money supply under the Conservatives.
I turn to the amendment put forward by the Liberal Party, to which the hon. Member for Cornwall, North spoke. He quite rightly said that this was an amendment to secure reduced rate relief. I am bound to tell him that the amendment as drafted would cost a lot more than £950 million. The intention behind the amendment would cost £1,250 million.
He asked why people should start paying tax at the basic rate and he called for a reduced rate band. I wish that we could introduce a reduced rate band, increased personal allowances, and reduce the basic rate. We might get a better profile in the income tax system if we could. But, unfortunately, that costs


a lot of money. The choice must be made. The hon. Member for Cornwall, North would prefer a reduced rate band to a basic rate reduction from 35 to 33 per cent. That is a point of view and there are good arguments for it. There are also good arguments the other way, especially when it is necessary to link income tax reductions—as the Chancellor has—with obtaining a pay agreement.
Not only persons below average income are affected by a pay agreement. It also affects those on average incomes and those with higher than average incomes. In the context of securing a pay agreement it was thought to be fairer this year to reduce the basic rate than to have a reduced rate band, because this would spread the benefit more widely among all those who pay tax at the basic rate.
If in future it proves possible, and the money is available, I would hope that we would introduce a reduced rate band in order to gave a fairer system of income tax.

Mrs. Audrey Wise: Could my hon. Friend tell us the attitude of the TUC to a reduced rate band?

Mr. Davies: The TUC put forward proposals for a reduced rate band, and we have had long discussions with the TUC about the difficulties of the reduced rate band and the basic rate. The TUC recognised the Chancellor's difficulties in choosing between a reduction in the basic rate and a reduced rate band. We could not do both. We had to make a choice and we decided that, in the context of the pay agreement, it was fairer this year to reduce the basic rate, assuming that we can get a satisfactory pay agreement. That is the better and more prudent way of managing the economy. It seems more sensible and responsible. I ask the Committee, in the light of that and of the fact that it will be possible to debate these matters again and to vote upon them on Report, to reject the amendment—

Mr. William Clark: The hon. Gentleman keeps saying that we can have another debate on these matters. If the 35 per cent. rate remains in the Bill and there is no pay deal, am I not right in saying that we cannot have a further debate on this reduction on Report?

Mr. Davies: The hon. Gentleman is not right: it is perfectly possible to have such a debate on Report. Perhaps the hon. Gentleman would agree not to vote tonight so as to ensure that a full debate is obtained on Report, bearing in mind what happens in the pay negotiations. That is the most sensible and prudent course. I ask the Committee to reject Amendment No. 15 if the Opposition have the temerity to press it.

Mr. David Howell: I should like to put some final points to the Committee, now that we have noted the gap in the Minister of State's speech. He has left the Committee in an intolerable position. First, he has not had the courtesy to answer any of the questions raised at the start.

Mr. Joel Barnett: The hon. Member may be in an intolerable position.

Mr. Howell: The Chief Secretary may be in intolerable straits as well in his present mood.
The Minister of State has left the Committee with no idea whether the so-called "carefully controlled fiscal stimulus" announced in the Budget, together with the conditional addition in the light of a satisfactory pay deal, was right or is valid still, or whether it has been revised upwards or downwards, or whether the prudence which was supposed to attach to the conditions is still the prudence to which the Government adhere.
If that is the position still, if things have not changed, if all the leaks in the papers about reflation have no basis, it is our view that the reduction of income tax from 35 per cent. to 33 per cent., at the standard rate should be in the Finance Bill now and that the Committee is entitled to know what is going to be in the Bill. Indeed, we should like to see far more substantial cuts in taxation, provided that they are accompanied by substantial cuts in public expenditure, but we certainly believe that this 2 per cent. cut, if it is still prudent and within the scope of the sort of things said on 29th March, should be in the Finance Bill. If it is not correct, if there has been a revision of view, the Government should say so—the Minister of State should have said something about it—and the proposal could have been dropped.
Our fear—I think that it is the fear also of many people outside this Committee and outside this country—is that something quite different has happened, that, after the talking about conditionality on 29th March, all that has conveniently been forgotten, this conditional tax cut has been consolidated into the Treasury's judgment on these affairs, and the Government are now discussing something different with the TUC. All the leaks and rumours seem to confirm that they are discussing the next round of reflation, the July package, the autumn Budget, with which we are so familiar. Indeed, with this Government, we have to adopt the slogan of the old Windmill Theatre—"We never closed"—because we have hardly finished one Finance Bill before we have to start another.
We believe—we do not know; the Committee has been given no evidence that the Government are now considering another round of reflation over and above the fixed tax cut announced in the Budget and the provisional cut from 35 to 33 per cent.

Mr. Lawson: There has been some more today.

Mr. Howell: As my hon. Friend reminds us, there has been a further bit of reflation today—the £130 million, which, as the Chief Secretary has told us, must go on the public sector borrowing requirement.
It might be said that reflation is a good thing. Are we not urging all the other world leaders—have we not just spent a Summit Conference urging them—to tackle unemployment? Have not the Prime Minister and the Chancellor been running around the world demanding that other countries, particularly the surplus countries, should expand? Indeed, many of them have already pushed ahead with quite high growth rates and are behaving in a way which, we all hope, will contribute to the recovery from the world recession and an overall reduction in the enormous and totally unacceptable numbers of unemployed.
10.45 p.m.
The difference is that Germany, if it is to reflate, will do so from a basis of 4 per cent. inflation. The United States will be adopting its next move, if it can

be safely and prudently managed, from a basis of 7 per cent. inflation. What seems to be in the Government's mind is something quite different. They are planning to go back to the bottleneck, to another take-off, from a rate of 15 per cent. inflation.
What will be the effect of that? It will not mean more jobs. It will not increase confidence or create higher investment, for which Labour Members below the Gangway hope in their innocent belief that there should be more public expenditure and more reflation. What will come from more reflation is more inflation, and from more inflation will come fewer jobs, more difficulties ahead, more uncertainty and less confidence. That is our fear. It is a fear that we believe those who have a genuine interest for working people share as well as those who want to see a return to stability in this country.
The Prime Minister this afternoon was talking about his stabilisation policies to which the Government are going to stick. We could have heard confirmation of that from the Minister of State. We have heard nothing at all. We have just heard vague excuses and ambiguity about what is to happen next. We do not know whether we shall see these tax cuts in the Finance Bill at all. All the signs are that we shall not see them in the Finance Bill.
As with so many of his undertakings and predictions, I suspect that the undertaking of the Chancellor of 29th March will have to be abrogated, changed, withdrawn, adjusted, modified, or whatever the convenient word to the circumstances is.
A new difficulty of overall uncertainty will be created, which will mean fewer jobs not more, more people on the dole queues and not fewer, less investment and not more. We think that is bad for our country.
By their management of these affairs and by their total failure to answer our questions in Committee, the Government have contributed to these difficulties. Only one certainty seems to exist in the present Committee stage of this Finance Bill, and that is the certainty that the Liberal Party, whatever its beliefs and principles, will go on clinging to the sinking hulk of the Labour Government. That is one certainty that we can all recognise, and we all know why that is so.
Those hon. Members who earlier heard the hon. Member for Cornwall, North (Mr. Pardoe), with his almost comical selective memory about the economy in the last few years, will recognise that what he said confirms my prediction. The one certainty is that they will cling on as the whole ship goes down.
But for the rest of us there is no such certainty. The taxpayer does not know where he stands in this Finance Bill, because the Minister of State has been unable to help him. The Committee does not know, because the Minister has been unable to help it. Parliament does not know what kind of Bill it is supposed to be dealing with or whether the condition still stands, because the Minister of State has been unable to help it. The country does not know whether the Budget judgement remains valid and whether the Chancellor is still pursuing prudent policies, or whether he is away over the hills on some new reflationary kick which will lead to more inflation,

even though it may temporarily buy back a few of the dwindling votes of this Government.

We believe this approach is damaging to confidence. It does not help working people. It does not make it any easier to handle the next phase of pay restraint. What is needed is a clear and open understanding and not a hole in the corner deal based on dubious conditions which have now been placed in question. I believe it right that we should show our objection to this approach and I would advise my hon. Friends to vote for the amendment against the Government tonight. I believe it is right because it will show to the country that the Government are once again damaging confidence, damaging the workers, and damaging our nation.

Question put, That the amendment be made:—

The Committee divided: Ayes 252, Noes 272.

Division No. 126]
AYES
[10.50 p.m.


Adley, Robert
Davies, Rt Hon J. (Knutsford)
Hampson, Dr Keith


Aitken, Jonathan
Dean, Paul (N Somerset)
Hannam, John


Alison, Michael
Dodsworth, Geoffrey
Harrison, Col Sir Harwood (Eye)


Amery, Rt Hon Julian
Douglas-Hamilton, Lord James
Harvie Anderson, Rt Hon Miss


Arnold, Tom
Drayson, Burnaby
Hastings, Stephen


Atkins, Rt Hon H. (Spelthorne)
du Cann, Rt Hon Edward
Havers, Sir Michael


Awdry, Daniel
Durant, Tony
Hawkins, Paul


Bain, Mrs Margaret
Dykes, Hugh
Hayhoe, Barney


Baker, Kenneth
Eden, Rt Hon Sir John
Henderson, Douglas


Bell, Ronald
Edwards, Nicholas (Pembroke)
Hicks, Robert


Benyon, W.
Elliott, Sir William
Higgins, Terence L.


Berry, Hon Anthony
Emery, Peter
Hodgson, Robin


Biffen, John
Evans, Gwynfor (Carmarthen)
Holland, Philip


Biggs-Davison, John
Eyre, Reginald
Hordern, Peter


Blaker, Peter
Fairbairn, Nicholas
Howe, Rt Hon Sir Geoffrey


Body, Richard
Fairgrieve, Russell
Howell, David (Guildford)


Boscawen, Hon Robert
Fell, Anthony
Hunt, David (Wirral)


Bottomley, Peter
Finsberg, Geoffrey
Hunt, John (Bromley)


Bowden, A. (Brighton, Kemptown)
Fisher, Sir Nigel
Hurd, Douglas


Boyson, Dr Rhodes (Brent)
Fletcher, Alex (Edinburgh N)
Hutchison, Michael Clark


Braine, Sir Bernard
Fookes, Miss Jane.
Irving, Charles (Cheltenham)


Brittan, Leon
Forman, Nigel
James, David


Brocklebank-Fowler, C.
Fowler, Norman (Sutton C'f'd)
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)


Brooke, Peter
Fox, Marcus
Johnson Smith, G. (E Grinstead)


Brotherton, Michael
Fraser, Rt Hon H. (Stafford &amp; St)
Jones, Arthur (Daventry)


Bryan, Sir Paul
Fry, Peter
Jopling, Michael


Buchanan-Smith, Alick
Galbraith, Hon T. G. D.
Joseph, Rt Hon Sir Keith


Buck, Antony
Gardiner, George (Reigate)
Kaberry, Sir Donald


Budgen, Nick
Gardner, Edward (S Fylde)
Kershaw, Anthony


Bulmer, Esmond
Gilmour, Rt Hon Sir Ian (Chesham)
Kimball, Marcus


Burden, F. A.
Gilmour, Sir John (East Fife)
King, Evelyn (South Dorset)


Butler, Adam (Bosworth)
Glyn, Dr Alan
King, Tom (Bridgwater)


Carlisle, Mark
Godber, Rt Hon Joseph
Kitson, Sir Timothy


Chalker, Mrs Lynda
Goodhart, Philip
Knight, Mrs Jill


Churchill, W. S.
Goodhew, Victor
Knox, David


Clark, Alan (Plymouth, Sutton)
Goodlad, Alastair
Lamont, Norman


Clark, William (Croydon S)
Gorst, John
Latham, Michael (Melton)


Clarke, Kenneth (Rushcliffe)
Gow, Ian (Eastbourne)
Lawrence, Ivan


Clegg, Walter
Gower, Sir Raymond (Barry)
Lawson, Nigel


Cockcroft, John
Gray, Hamish
Le Marchant, Spencer


Cope, John
Griffiths, Eldon
Lester, Jim (Beeston)


Cormack, Patrick
Grist, Ian
Lewis, Kenneth (Rutland)


Costain, A. P.
Grylls, Michael
Lloyd, Ian


Crawford, Douglas
Hall, Sir John
Loveridge, John


Crouch, David
Hall-Davis, A. G. F.
Luce, Richard


Crowder, F. P.
Hamilton, Michael (Salisbury)
MacCormick, Iain




McCrindle, Robert
Page, Rt Hon R. Graham (Crosby)
Sproat, Iain


Macfarlane, Neil
Page, Richard (Workington)
Stainton, Keith


MacGregor, John
Parkinson, Cecil
Stanbrook, Ivor


Mackay, Andrew James
Pattie, Geoffrey
Stanley, John


Macmillan, Rt Hon M. (Farnham)
Percival, Ian
Steen, Anthony (Wavertree)


McNair-Wilson, M. (Newbury)
Peyton, Rt Hon John
Stewart, Rt Hon Donald


McNair-Wilson, P. (New Forest)
Powell, Rt Hon J. Enoch
Stewart, Ian (Hitchin)


Madel, David
Price, David (Eastleigh)
Stokes, John


Marshall, Michael (Arundel)
Prior, Rt Hon James
Stradling Thomas, J


Marten, Neil
Pym, Rt Hon Francis
Tapsell, Peter


Mates, Michael
Rathbone, Tim
Taylor, R. (Croydon NW)


Mather, Carol
Rawlinson, Rt Hon Sir Peter
Taylor, Teddy (Cathcart)


Maude, Angus
Rees, Peter (Dover &amp; Deal)
Tebbit, Norman


Maudling, Rt Hon Reginald
Rees-Davies, W. R.
Temple-Morris, Peter


Mawby, Ray
Renton, Rt Hon Sir D. (Hunts)
Thatcher, Rt Hon Margaret


Maxwell Hyslop, Robin
Renton, Tim (Mid-Sussex)
Thomas, Rt Hon P. (Hendon S)


Mayhew, Patrick
Rhodes James, R.
Thompson, George


Meyer, Sir Anthony
Ridley, Hon Nicholas
Townsend, Cyril D.


Miller, Hal (Bromsgrove)
Ridsdale, Julian
Trotter, Neville


Mills, Peter
Rifkind, Malcolm
van Straubenzee, W. R.


Miscampbell, Norman
Roberts, Michael (Cardiff NW)
Vaughan, Dr Gerard


Mitchell, David (Basingstoke)
Roberts, Wyn (Conway)
Viggers, Peter


Moate, Roger
Rossi, Hugh (Hornsey)
Wakeham, John


Molyneaux, James
Rost, Peter (SE Derbyshire)
Walder, David (Clitheroe)


Monro, Hector
Royle, Sir Anthony
Wall, Patrick


Montgomery, Fergus
Sainsbury, Tim
Walters, Dennis


Moore, John (Croydon C)
St. John-Stevas, Norman
Watt, Hamish


More, Jasper (Ludlow)
Shaw, Giles (Pudsey)
Weatherill, Bernard


Morgan, Geraint
Shelton, William (Streatham)
Wells, John


Morgan-Giles, Rear-Admiral
Shepherd, Colin
Whitelaw, Rt Hon William


Morris, Michael (Northampton S)
Shersby, Michael
Wiggin, Jerry


Morrison, Charles (Devizes)
Silvester, Fred
Wilson, Gordon (Dundee E)


Mudd, David
Sims, Roger
Winterton, Nicholas


Neave, Airey
Skeet, T. H. H.
Wood, Rt Hon Richard


Nelson, Anthony
Smith, Dudley (Warwick)
Younger, Hon George


Neubert, Michael
Smith, Timothy John (Ashfield)



Newton, Tony
Speed, Keith
TELLERS FOR THE AYES:


Nott, John
Spence, John
Sir George Young and


Onslow, Cranley
Spicer, Michael (S Worcester)
Mr. Peter Morrison.


Oppenheim, Mrs Sally






NOES


Abse, Leo
Cook, Robin F. (Edin C)
Gilbert, Dr John


Allaun, Frank
Cowans, Harry
Ginsburg, David


Archer, Peter
Cox, Thomas (Tooting)
Golding, John


Armstrong, Ernest
Crawshaw, Richard
Gould, Bryan


Ashley, Jack
Crowther, Stan (Rotherham)
Gourlay, Harry


Ashton, Joe
Cryer, Bob
Graham, Ted


Atkins, Ronald (Preston N)
Cunningham, G. (Islington S)
Grant, George (Morpeth)


Atkinson, Norman
Cunningham, Dr J. (Whiteh)
Grant, John (Islington C)


Barnett, Guy (Greenwich)
Davidson, Arthur
Grocott, Bruce


Barnett, Rt Hon Joel (Heywood)
Davies, Bryan (Enfield N)
Hamilton, James (Bothwell)


Bales, Alf
Davies, Denzil (Llanelli)
Harrison, Waller (Wakefield)


Bean, R. E.
Davies, Ifor (Gower)
Hart, Rt Hon Judith


Beith, A. J.
Davis, Clinton (Hackney C)
Hattersley, Rt Hon Roy


Benn, Rt Hon Anthony Wedgwood
Deakins, Eric
Hatton, Frank


Bennett, Andrew (Stockport N)
Dean, Joseph (Leeds West)
Hayman, Mrs Helene


Bidwell, Sydney
Dell, Rt Hon Edmund
Healey, Rt Hon Denis


Bishop, E. S.
Dempsey, James
Heffer, Eric S.


Blenkinsop, Arthur
Doig, Peter
Hooley, Frank


Boardman, H.
Douglas-Mann, Bruce
Hooson, Emlyn


Booth, Rt Hon Albert
Duffy, A. E. P.
Horam, John


Boothroyd, Miss Betty
Dunnett, Jack
Howell, Rt Hon Denis (B'ham, Sm H)


Bottomley, Rt Hon Arthur
Eadie, Alex
Howells, Geraint (Cardigan)


Bradley, Tom
Edge, Geoff
Hoyle, Doug (Nelson)


Brown, Hugh D. (Provan)
Ellis, John (Brigg &amp; Scun)
Huckfield, Les


Brown, Robert C. (Newcastle W)
English, Michael
Hughes, Rt Hon C. (Anglesey)


Buchan, Norman
Ennals, David
Hughes, Robert (Aberdeen N)


Buchanan, Richard
Evans, Fred (Caerphilly)
Hughes, Roy (Newport)


Callaghan, Rt Hon J. (Cardiff SE)
Evans, Ioan (Aberdare)
Hunter, Adam


Callaghan, Jim (Middleton &amp; P)
Ewing, Harry (Stirling)
Irvine, Rt Hon Sir A. (Edge Hill)


Campbell, Ian
Faulds, Andrew
Irving, Rt Hon S. (Dartford)


Canavan, Dennis
Fitch, Alan (Wigan)
Jackson, Colin (Brighouse)


Cant, R. B.
Fitt, Gerard (Belfast W)
Jackson, Miss Margaret (Lincoln)


Carmichael, Neil
Flannery, Martin
Janner, Greville


Carter, Ray
Fletcher, Ted (Darlington)
Jay, Rt Hon Douglas


Carter-Jones, Lewis
Foot, Rt Hon Michael
Jeger, Mrs Lena


Cartwright, John
Ford, Ben
Jenkins, Hugh (Putney)


Castle, Rt Hon Barbara
Fowler, Gerald (The Wrekin)
John, Brynmor


Clemitson, Ivor
Fraser, John (Lambeth, N'w'd)
Johnson, James (Hull West)


Cocks, Rt Hon Michael
Freeson, Reginald
Johnson, Walter (Derby S)


Cohen, Stanley
Freud, Clement
Johnston, Russell (Inverness)


Coleman, Donald
Garrett, John (Norwich S)
Jones, Alec (Rhondda)


Colquhoun, Ms Maureen
Garrett, W. E. (Wallsend)
Jones, Barry (East Flint)


Conian, Bernard
George, Bruce
Jones, Dan (Burnley)







Judd, Frank
Noble, Mike
Stallard, A. W.


Kaufman, Gerald
Oakes, Gordon
Stewart, Rt Hon M. (Fulham)


Kelley, Richard
Ogden, Eric
Stoddart, David


Kerr, Russell
O'Halloran, Michael
Stott, Roger


Kilroy-Silk, Robert
Orbach, Maurice
Strang, Gavin


Kinnock, Neil
Orme, Rt Hon Stanley
Strauss, Rt Hon G. R.


Lambie, David
Ovenden, John
Summerskill, Hon Dr Shirley


Lamborn, Harry
Owen, Rt Hon Dr David
Swain, Thomas


Lamond, James
Padley, Walter
Taylor, Mrs Ann (Bolton W)


Latham, Arthur (Paddington)
Palmer, Arthur
Thomas, Jeffrey (Aberillery)


Leadbitter, Ted
Pardoe, John
Thomas, Mike (Newcastle E)


Lee, John
Park, George
Thomas, Ron (Bristol NW)


Lestor, Miss Joan (Eton and Slough)
Parry, Robert
Thorne, Stan (Preston South)


Lever, Rt Hon Harold
Pavitt, Laurie
Thorpe, Rt Hon Jeremy (N Devon)


Lewis, Ron (Carlisle)
Pendry, Tom
Tierney, Sydney


Lomas, Kenneth
Penhaligon, David
Tinn, James


Loyden, Eddie
Perry, Ernest
Tomlinson, John


Luard, Evan
Prentice, Rt Hon Reg
Torney, Tom


Lyon, Alexander (York)
Price, William (Rugby)
Tuck, Raphael


Lyons, Edward (Bradford W)
Radice, Giles
Varley, Rt Hon Eric G.


McCartney, Hugh
Rees, Rt Hon Merlyn (Leeds S)
Wainwright, Edwin (Dearne V)


McDonald, Dr Oonagh
Richardson, Miss Jo
Walden, Brian (B'ham, L'dyw'd)


McElhone, Frank
Roberts, Albert (Normanton)
Walker, Harold (Doncaster)


MacFarquhar, Roderick
Roberts, Gwilym (Cannock)
Walker, Terry (Kingswood)


MacKenzie, Gregor
Robinson, Geoffrey
Ward, Michael


McMillan, Tom (Glasgow C)
Roderick, Caerwyn
Watkins, David


Madden, Max
Rodgers, George (Chorley)
Weetch, Ken


Magee, Bryan
Rodgers, Rt Hon William (Stockton)
Weitzman, David


Mahon, Simon
Rooker, J. W.
Wellbeloved, James


Mallalieu, J. P. W.
Rose, Paul B.
White, James (Pollok)


Marks, Kenneth
Ross, Stephen (Isle of Wight)
Whitlock, William


Marshall, Dr Edmund (Goole)
Ross, Rt Hon W. (Kilmarnock)
Willey, Rt Hon Frederick


Marshall, Jim (Leicester S)
Rowlands, Ted
Williams, Rt Hon Alan (Swansea W)


Maynard, Miss Joan
Ryman, John
Williams, Alan Lee (Hornch'ch)


Meacher, Michael
Sandelson, Neville
Williams, Rt Hon Shirley (Hertford)


Mellish, Rt Hon Robert
Sedgemore, Brian
Williams, Sir Thomas (Warrington)


Mikardo, Ian
Selby, Harry
Wilson, Alexander (Hamilton)


Millan, Rt Hon Bruce
Shaw, Arnold (Ilford South)
Wilson, Rt Hon Sir Harold (Huyton)


Miller, Dr M. S. (E Kilbride)
Sheldon, Rt Hon Robert
Wilson, William (Coventry SE)


Miller, Mrs Millie (Ilford N)
Shore, Rt Hon Peter
Wise, Mrs Audrey


Mitchell, Austin Vernon (Grimsby)
Short, Mrs Renée (Wolv NE)
Woodall, Alec


Molloy, William
Silkin, Rt Hon S. C. (Dulwich)
Woof, Robert


Moonman, Eric
Silverman, Julius
Wrigglesworth, Ian


Morris, Alfred (Wythenshawe)
Skinner, Dennis
Young, David (Bolton E)


Morris, Charles R. (Openshaw)
Small, William



Morris, Rt Hon J. (Aberavon)
Smith, John (N Lanarkshire)
TELLERS FOR THE NOES:


Moyle, Roland
Snape, Peter
Mr. Joseph Harper and


Murray, Rt Hon Ronald King
Spearing, Nigel
Mr. Frank R. White.


Newens, Stanley
Spriggs, Leslie

Question accordingly negatived.

To report Progress and ask leave to sit again.—[Mr. Stoddart.]

Committee report Progress; to sit again tomorrow.

Orders of the Day — Mr. DENIS HAYDON

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Stoddart.]

11.7 p.m.

Mrs. Jill Knight: It would be difficult to find a case that dealt with so much unfairness and so great an injustice as that of Mr. Denis Haydon, the one-time headmaster of Court Lees Approved School in Surrey, at that time the biggest approved school in the country.
The facts are that towards the end of 1966 the headmaster of the school in-

dicated his intention to retire at the end of the year. Among the applicants for the job of headmaster was a Mr. Ivor Cook, who was a junior teacher on the staff. He did not get the job. Instead, Mr. Denis Haydon was appointed, but it soon became obvious that Mr. Ivor Cook was motivated by a malicious determination to destroy the successor to the post that he desired, and he took certain action against the school which was utterly disastrous for Mr. Denis Haydon.
Less than two months after Mr. Hay-don had taken up the appointment, Mr. Ivor Cook sent an anonymous letter to a national newspaper. He signed it "Approved school master", and in that letter he alleged that beatings of a savage nature took place practically every day at this approved school in Britain. He did not, however, give sufficient information to let it be known which school it was, but an immediate furore burst upon the scene.
The Minister will readily understand how many people wrote to the newspapers. Mr. Cook himself wrote again shortly afterwards. Having made allegations, he was bent upon proving them, and he sent a newspaper some photographs purporting to be pictures of the posteriors of boys from Court Lees School who had been savagely beaten, although he did not name the school from which they came.
However, in the second letter he had given sufficient background information for the Home Office, under whose charge this school came, to appreciate that it was Court Lees. As soon as that was known, the Home Secretary of the day instituted an inquiry.
I criticise the inquiry on many grounds. It was held in private in such a way as to beget an injustice which has continued ever since. Denis Haydon was given no information about the allegations against him. He was not allowed even to be present to hear the allegations. Had he been in open court, he would have known the charges being levelled against him. He could have called witnesses in his own behalf. However, because of the way the inquiry was set up, he was not allowed to be present.
That was most regrettable, because many of the staff at the school had detailed and first-hand knowledge of what had occurred at the school. However, they were not called.
Later, but not at that time, the photographic evidence which I have mentioned was strongly questioned by experts. Had the inquiry been held in open court, that photographic evidence would have come under far more careful scrutiny than it did at the inquiry.
The report of the inquiry contained many statements which were strongly refuted. One instance of what I regard as dreadful unfairness was that it was reported that canes ⅛mm thicker than those permitted were found to be used by Mr. Haydon. Yet when Mr. Haydon had assumed the office of headmaster of Court Lees School he had taken over a case of canes. Many Home Office inspectors had attended the school and seen the canes. It was surely not for Mr. Haydon to measure the canes at the time of his appointment and discover that they

were slightly thicker than was permitted by the Home Office.
In all, what the inquiry discovered was that caning had taken place at Court Lees School. The question of corporal punishment has bedevilled this case, because many people who are root and branch against the whole principle of corporal punishment have been blinkered in their scrutiny of what happened. The Home Office permitted caning to take place at approved schools. So caning was not against the rules.
However, the inquiry issued its report. Within days, the school was closed. All the boys were sent home, although many of them were only half-way through their courses. The staff were dismissed. An embargo was placed upon Denis Haydon from which he has never recovered. Ordinarily a teacher who is dismissed has certain rights under the rules of the National Union of Teachers, which are accepted and supported by the Government. Indeed, the rules are agreed to universally. It is fully understood that a teacher who is dismissed has a right to a tenure hearing.
Denis Haydon is the only teacher ever to be denied this right. I do not doubt that today he could in such circumstances claim for unjust dismissal and go before an industrial tribunal. But such bodies did not then exist and Mr. Haydon did not have that chance.
At the inquiry, counsel for the Home Office gave an express undertaking. He said that no one was in the dock and that no disciplinary consequences would follow without a further investigation. He said that an opportunity to present a defence would be given. There were disciplinary consequences, for Denis Haydon lost his job. There was no further investigation, and no opportunity to present a defence was given. There was merely this stream of broken promises.
I will state categorically that Denis Haydon has many supporters. All of those who knew the details of the case claimed then, and still claim, that he has been most unjustly treated. All the staff save one, and many important bodies and persons, supported then, and still support, the case for a public inquiry. These supporters include The Times, the High Sheriff of Surrey, the


Bishop of Woolwich, and the National Union of Teachers. Sir John Vaughan-Morgan, as he then was, who was Denis Haydon's Member of Parliament at that time and the Member in whose constituency Court Lees was situated, joined, and still joins, the queue of people who ask for a public inquiry.
The parents of the boys at Court Lees—and even the boys themselves—have demanded, but have never obtained, a public inquiry into this case. There have been debates in the House of Lords and in the Commons, as well as many Parliamentary Questions. I quote from what Mr. Quintin Hogg—as he then was—said in the House:
The meanest criminal in the country
and Denis Haydon was not that—
is entitled to a fair trial. The fundamental question in giving anybody a fair trial is whether one has listened to both sides of the case."—[Official Report, 16th November 1967; Vol. 754, c. 694.]
That was what Mr. Hogg said. Mr. Haydon has never had a fair trial.
If Haydon could have afforded it, perhaps he would even have sued the Home Secretary, but how could he afford it when he had just lost his job and his prospects, yet his family commitments had to be met? He was in a difficult position because he had taken on a highly paid job and planned his life on that assumption.
The House has a solemn duty to ensure that its servants are not guilty of sustaining an injustice that they have inflicted on a subject too poor to seek reparation in the courts.
Mr. Haydon was allowed an interview with a civil servant and, eventually, even with the Minister, but he was never likely to get anywhere with them since one served the other and the latter was a Minister who had supported the injustice—hardly an impartial duo!
The case then went to the Parliamentary Commissioner, who found:
I find that there was an element of maladministration in the procedure followed by the Home Office in that it breached what I have called fair employment practice and so
at the time
caused injustice to Mr. Haydon.
However, because the Home Office sent Mr. Haydon on a course and subsequently removed the embargo on his employment as a headmaster, the Ombudsman said

"a remedy was provided". That was no remedy. The embargo might have been removed but it was a ghost removal, because Mr. Haydon has applied for 35 posts as a head and deputy head and in child care but the only post that he has ever been able to obtain is that of warden in an adult probation hostel in my constituency. He has made, and is making, an excellent job of that and has even been invited to lecture in the United States—so wide has his fame gone about the excellence of his work.
However, Mr. Haydon has suffered a catastrophic drop in salary because of the result of the inquiry. He has had severe financial difficulties and he has had to withdraw his superannuation contributions—with a cruel effect on his pension, which is not so far away now. I am concerned about this, but Mr. Haydon is concerned about clearing his name.
Mr. Gibbens headed the inquiry to which I have made reference. He said of Haydon two years later:
He was not a man against whom one could make any criticism of improper conduct.
The course of the inquiry would have been different had it been known at the time that Ivor Cook was a dangerous character. Indeed, first—and I think that this information will be news to the Minister—Mr. Cook had been dismissed from his former school for threatening to shoot the headmaster. At the school to which he went after Court Lees—the job that the Home Office obtained for him—he threatened to murder the head. While at the same school he took a boy to the police claiming that the head had assaulted the child. It is a good thing, bearing in mind the history that we know, that the boy broke down under examination and admitted that the allegations were untrue and that Mr. Cook had put him up to it.
Finally, I have to tell the House that Mr. Cook was in receipt of an Army pension for psycho-neurosis at the time he held the Court Lees job and should never have been near normal boys, let alone disturbed boys. This is the man who was listened to and believed. This is the man who destroyed Denis Haydon.
Ten long years have passed since all this happened. The National Union of Teachers has asked time and again that the Minister should see a deputation that could try to set the matter right. All I


am asking is that in the light of the facts that I have given—and to which I am sure the Minister has listened carefully—the Secretary of State should see a deputation on Denis Haydon's behalf, because I can assure him that it is still not too late to make reparation and grant justice.

11.21 p.m.

The Under-Secretary of State for Health and Social Security (Mr. Alfred Morris): I am very glad at the third attempt to have the opportunity now to reply to this much-delayed debate. It came close to being regarded as the "nearly" debate, for this is its third appearance on the Order Paper. On both previous occasions it was thwarted by the votes of the Opposition. I voted for us to have the debate on both occasions and I well appreciate that it must have been with mixed feelings that the hon. Lady the Member for Birmingham, Edgbaston (Mrs. Knight) voted on each occasion for the House to adjourn before her debate could take place. Now at last we are at one.
I am very much aware of the sustained interest the hon. Lady has had in Mr. Haydon and his problem. No one could have argued the case with more concern or more conscientiously. She discussed it with Home Office Ministers as long ago as 1971, under the previous Government. Mr. Haydon has continued to pursue his complaints through various channels. Indeed, my right hon. Friend the Secretary of State recently considered representations on behalf of Mr. Haydon. My right hon. Friend decided that he should take no further action. I sympathise with the hon. Lady's support for Mr. Haydon and I know how genuinely concerned she is to help. We have come to the conclusion, however, as did our predecessors in the previous Government, that there is no case for intervention by Ministers.
I should perhaps explain that action arising from the Court Lees hearing was dealt with by the Home Office until 1st January 1971. At that date, in accordance with the Children and Young Persons Act 1969, the matters concerning children were transferred to my Department. This includes responsibility for any questions following the Court Lees inquiry.
Mr. Haydon was, as the hon. Lady has said, appointed in January 1967 headmaster at Court Lees School, an approved school for boys aged 13–15 and run by a voluntary body under the aegis of the Home Office. As a result of letters from an anonymous member of staff to daily newspapers in March, April and May of that year, making serious allegations about approved schools generally and alleging excessive caning in the writer's own approved school, it became apparent that the school was the Court Lees Approved School.
In the light of the nature of the allegations and the manner in which they had been made, the Home Office appointed Mr. Brian Gibbens, Q.C., now Judge Gibbens, to hold an inquiry. The report was submitted to the Home Secretary in July 1967 and published in August of that year as Command 3367. Mr. Gibbens found that excessively severe punishment had been inflicted on a number of boys and that there had been several breaches of the approved school rules relating to punishment. Mr. Haydon had not conformed with the rules. In fact, during his headmastership canes of a type not authorised by the Secretary of State were habitually used for corporal punishment. He frequently caned boys after pulling their shirts from their trousers. In four instances he had caned boys with excessive severity. Moreover, he and other members of the staff had on many occasions totally failed to record corporal punishment in the punishment book.
After discussion with the managers of Court Lees, the then Home Secretary gave notice of his intention to withdraw the school's certificate of approval, which took effect in February 1968. All members of staff, including Mr. Haydon, were given six months' notice. Arrangements were made for Surrey County Council to open a new school in the same premises, to which most of the existing staff were appointed.
Under the Approved School Rules 1933, no appointments of the headmaster of an approved school could be made without the approval of the Home Secretary. In view of the result of the inquiry, it was decided to ban both Mr. Haydon and his deputy, Mr. Dracon, from appointments as headmaster, but the decision did not preclude either from


employment at a lower level than headmaster. Whether Mr. Haydon could be employed in other types of school was a matter for the Secretary of State for Education and Science, who was currently giving consideration to Mr. Haydon's suitability for continued employment as a teacher. The Department of Education and Science informed Mr. Haydon in December 1967 that, in the light of all that had happened, it had decided not to declare him unsuitable for employment as a teacher but to give him a grave warning as to his future conduct.
As a result of further representations, Mr. Haydon was accorded a lengthy interview with the Deputy Under-Secretary of State at the Home Office and was also seen personally by the Home Secretary. The Home Secretary, however, decided to confirm his conclusion that he would not approve Mr. Haydon's appointment as headmaster of any approved school. Two years later, in 1969, following further action by the National Union of Teachers and the examination of evidence supplied by the London University Institute of Education and officials of the Home Office about Mr. Haydon's attitude, the embargo was removed with effect from 29th July 1969. In spite of a number of applications for other posts as headmaster, Mr. Haydon's efforts have remained unsuccessful.
I understand that the Home Office from the beginning took action to assist Mr. Haydon. It accepted the responsibility of assisting the staff of Court Lees to obtain other employment and, in Mr. Haydon's case, recognised the need to help him to re-establish himself professionally. Since at the end of his period of notice in February 1968 he had not obtained an alternative post, his notice was extended until 30th April. As he was then still unemployed, the Home Office arranged that he should attend a one-year course at the London University Institute of Education to improve his professional qualifications. He subsequently obtained a diploma in the education of maladjusted children. During his period at the Institute of Education, from 1st May 1968 to 31st August 1969, he had the salary of a deputy headmaster. At the end of this period he was still unable to find another headmaster's post and was appointed temporarily as a research officer at an ap-

proved school at a slightly higher salary than that of a deputy headmaster.
After removal of the embargo in 1969, Mr. Haydon applied for a number of posts as headmaster of approved schools. He was short-listed for one such post, but was not appointed. In February 1970, he took up post as the warden—principal—of Eliot House Probation Hostel in Birmingham at a considerably reduced salary. It must, however, be emphasised that there was no necessity for him to have taken such a lowly-paid post. He could have applied for positions as a teacher or deputy head at an approved school with a considerably higher salary but, so far as is known, he did not do so. On one occasion he was offered by the Home Office a job as a temporary deputy headmaster, but refused on the grounds that he should rightfully be a headmaster and that it would be wrong for him to accept the offer. He was also offered a post as a basic grade teacher on remedial work in an Inner London Education Authority comprehensive school, but refused that offer also. All this must be taken fully into account in any consideration of Mr. Haydon's present post and salary.
At the time of his appointment as a warden, against the advice given him by his unions, he also withdrew his pension contributions rather than transfer them to the Local Government Superannuation Scheme. This, again, has contributed to his present difficulties.
During 1971 the Parliamentary Commissioner for Administration considered Mr. Haydon's case. The hon. Lady has referred to this. The complaint was that he had suffered injustice on two grounds: first, because the Home Office's decision to close the school and to disbar him from employment as a headmaster of any approved school constituted disciplinary action taken against him without a further inquiry, which he claimed was promised by the Treasury Solicitor during the course of the Gibbens inquiry and without his being given any other opportunity to make representations; and, secondly, on the ground that the effect of his disbarment had been to prevent him from obtaining other employment as a headmaster in an approved school and that, as a result, he had been obliged to take a post at a considerably lower salary outside the approved school service.
The Commissioner found, on the first of these grounds, that an injustice had been done to Mr. Haydon but that suitable remedial action had been taken by the Home Office as arrangements were made for Mr. Haydon's representations to be heard and considered before his employment was terminated and the embargo came into force. On the second, the Commissioner found that it was Mr. Haydon's actions, not those of the Home Office, which had resulted in his financial difficulties.
Since then, as I have said, both Mr. Haydon's union and the hon. Lady have made representations to successive Ministers. I know that the hon. Lady's concern is with Mr. Haydon's earnings and his loss of superannuation. His present earnings are said to be £4,269 as against the £7,500 he would have earned had he remained a headmaster. There is also the loss he has suffered as a result of the non-transference of his pension contributions.
I must re-emphasise, however, that the Government went a long way to help Mr. Haydon. He received his full salary until 30th April 1968 and was paid as a deputy headmaster until August 1969. He was then given a special job at a higher salary until 31st January 1970. His action in taking a post outside the approved school field, at a much reduced salary, was of his own choosing. He also acted against advice in withdrawing his pension contributions. The Parliamentary Commission for Administration

concluded that it was his own actions rather than those of the Home Office which resulted in Mr. Haydon's present financial position.

Mrs. Knight: I must point out again—I made the point in my speech—that this man was forced to do that because he had no other way to get the money which he had to find to meet commitments which he had made on the understanding that he had a job with a higher salary. He did not wish to withdraw the contributions. He had no alternative.

Mr. Morris: I have referred already to the other possibilities which might be open to Mr. Haydon. I shall ensure that everything said by the hon. Lady tonight is fully and seriously considered.
I was referring to the report of the Parliamentary Commission for Administration. The Commissioner accepted that the Home Office could not be held responsible for the superannuation position, and he saw no case for financial compensation.
No new evidence has come to light which would lead Ministers to alter their original decision to accept the findings of the PCA. Nevertheless, as the hon. Lady has been in touch with me during the evening to request that a deputation be received, I shall see to it that the request is carefully considered.

Question put and agreed to.

Adjourned accordingly at twenty-four minutes to Twelve o'clock.